Practice-Oriented Marketing: Basics – Instruments – Case Studies 3658397160, 9783658397166

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Ralf T. Kreutzer

Practice-Oriented Marketing Basics – Instruments – Case Studies

Practice-Oriented Marketing

Ralf T. Kreutzer

Practice-Oriented Marketing Basics – Instruments – Case Studies

Ralf T. Kreutzer Hochschule für Wirtschaft und Recht Berlin, Germany

ISBN 978-3-658-39716-6    ISBN 978-3-658-39717-3 (eBook) https://doi.org/10.1007/978-3-658-39717-3 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH, part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

“He who is finished can do no right; a becoming man will always be thankful.” —Johann Wolfgang von Goethe

Preface to the 6th Edition

Dear Readers, The demands on company management are changing ever faster. This also applies to marketing. However, the basics of marketing are more important than ever in order to survive in the increasingly global and digital competition. Companies that do not master these basics, do not recognize trends and do not strive for consistent customer orientation will be consistently punished by the market and thus by customers. Year after year, month after month, companies close, having lost favor with their customers. Neither size nor an impressive company history can protect against this. The only thing that protects against this is sustainable corporate management that consistently uses marketing to create value for customers as well as to create value for the company. Today’s challenge is to understand and implement marketing as a value driver for customers and companies alike. For this to succeed, the silo mentality that can still be observed in many corporate divisions must be dismantled. In marketing itself, the often still observable divides between the online and offline worlds must be overcome. Today, companies must think and act “noline” if they want to meet the expectations of their customers. The tensions between marketing and sales also seem out of date. Far too often, the people responsible here still block each other instead of creating value for customers and companies alike. Marketing managers are challenged as networkers, as bridge builders between the customers and all other company divisions. Here, marketers can distinguish themselves as creative partners, as initiators, as supporters, as market researchers, etc. – for the benefit of the entire company. Companies that do not pursue a consistent customer orientation will not survive in the long term. Therefore, knowledge of the core of marketing, its goals, strategies and measures is important for all top performers – even beyond the marketing sector. The objective of this work, which is now in its 6th edition, is to convey this important knowledge. New in this edition are chapters on the topics of customer journey map, special market research concepts and special forms of static pricing and conditions. In ­addition, “mnemonic boxes” and “food for thought” have been integrated. Since this edivii

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tion, readers of the print book can test their knowledge with the Springer Nature Flashcards app. I would like to thank all my readers who have motivated me to start this new edition with their positive feedback and ideas. I would like to thank my tried and tested team of editors Barbara Roscher and Angela Meffert from Springer Gabler Verlag, who have once again supported me with meticulousness, but above all with heart and spirit. With the compliments of the family Königswinter/Berlin, Deutschland

Ralf T. Kreutzer

Preface to the 1st Edition

At the beginning of the development of this textbook, there was an idea: to write a book not only for, but also with the learners, i.e. the target group in focus. Starting from an intensive discussion with Rolf-Günther Hobbeling, Marketing Manager of Gabler Verlag, Wiesbaden, and deepened by good conversations with the editor who supervised me, Barbara Roscher, this idea was refined and concretized more and more within a year. Therefore, after the title “Practice-oriented Marketing” had set the focus of this textbook, students at the Berlin School of Economics (since 01.04.2009: Berlin School of Economics and Law) were asked about their expectations regarding a marketing textbook. After all, this work should not only convey the relevant marketing substance but ideally also make studying fun – certainly an ambitious demand on a textbook. The book was developed on the basis of more than 300 questionnaires, which were returned by the students with valuable suggestions for conception and design. However, this was only the first part of involving the target group in the development process. In addition, all parts of the book were checked by Katharina Burgdorff, Stefanie Jägerling and Steffen Grunwald, students at the Fachhochschule für Wirtschaft, Berlin, in terms of comprehension, motivational power and reading enjoyment. They also contributed intensively to the research of convincing practical examples. I would like to express my special thanks to them at this point because I received many important suggestions through them. Finally, many of the integrated case studies and questions were discussed in my lectures in order to critically question their validity and transfer performance. Therefore, I would like to thank my students who, by critically discussing the diverse aspects of marketing, have always provided new ideas for the further development and presentation of the material. Based on the manifold exchange with the students, each chapter was not only preceded by learning objectives but also developed control questions. This gives you the opportunity to recapitulate the material you have learned. I have deliberately omitted sample solutions because you should seek an exchange about the “optimal” solution with other students. A subject like marketing, to which everyone can contribute a lot due to his individual wealth of experience, does not open up by stubborn memorization  – and also not if  – as happened  – the material is spoken on MP3 for regular repetition. In order to understand,

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internalize and apply marketing, dialogue is required. The repetition questions are intended to stimulate this. I feel a special gratitude towards my academic teachers Prof. Dr. Hans Raffée and Prof. Dr. Erwin Dichtl, University of Mannheim, who awakened my enthusiasm for marketing, which still continues today … A big thank you also goes to my wife Sabine, who showed understanding over many months for the fact that I also put in countless evening, night and weekend shifts for this work. With a textbook like this, the question arises as to how the topic of “gender” is to be dealt with correctly? Is it necessary to speak of the client and the customer, of the decision-­ maker and the decision-woman every time? I hope my readers and – at this point – female readers will forgive me if I refrain from using such reading brakes and also from using the variants customers or employees, because in my opinion a clean declension would make the text unnecessarily bumpy. I also refrain from using the variant “students”, which is often used in order to seemingly elegantly circumvent the gender issue. This form is very common, but unfortunately grammatically wrong. For a student is a student only as long as he or she is actually studying, be it the Wöhe, a lecture notes or the menu. Before and after that, he or she is a student, but not a student. Thus, a swimmer is also a swimmer only as long as he/she swims. Consequently, even the best student is once a relaxer, a dancer, a reader, a chatterer, a texter and so on. The difficulty even the legislator has with the gender issue is shown by § 1 UWG: “This law serves to protect competitors, consumers and other market participants against unfair competition …”. Why not also female competitors, market participants, etc.? I hope to express my respect and esteem for the female gender in other ways than by ending “inside” on all sorts of terms in this textbook. In the case of the literature references, I have concentrated – in addition to central original sources – primarily on those works that provide the reader with further background information, are highly topical and have been widely disseminated. No claim is made to cite all authors or works that have already published something on the respective topics. You, dear reader, can decide for yourself whether my efforts have been worthwhile overall. For a constructive dialogue with you, you will always find an open ear. Sincerely yours Königswinter/Berlin, Deutschland October 2006

Ralf T. Kreutzer

Voices About the Book

The 6th edition of the book “Praxisorientiertes Marketing” has been extensively revised and supplemented with important, current topics of online marketing and digitalization. This further enhances the strengths of the previous editions. “Praxisorientiertes Marketing” is very descriptive, compact and at the same time well-founded. The clear language and the many current case studies motivate all readers to deal conceptually with the exciting practice of marketing. Prof. Dr. Klaus Gutknecht, Professor of Retail, Service and E-Marketing, Munich University of Applied Sciences In the now 6th edition of his “Praxisorientiertes Marketing”, Ralf Kreutzer has again succeeded in setting the right priorities. He makes it convincingly clear that the proven basics in marketing are also valid in the online and digital age. At the same time, this completely revised edition shows how strongly digitalization has permeated the entire field of marketing. Many current examples and studies prove this and round off the work. Predict: especially worth reading! Prof. Dr. Dr. h. c. Wolfgang Fritz Technical University of Braunschweig and University of Vienna The new edition of the book “Praxisorientiertes Marketing” is more than recommendable: Because it not only integrates the most current developments and concepts of this already highly dynamic field but also works out exactly those topics that are particularly important for entrepreneurial practice. In addition, the new edition impresses with even greater conciseness in its presentation, with an even clearer structure, more precise intermediate results and important mnemonic boxes. Further proof of Ralf T. Kreutzer’s special expertise in marketing, his high passion for conveying knowledge in the best possible way and his special ability to identify the truly relevant topics. Prof. Dr. Wolfgang Merkle, UE  – University of Europe for Applied Sciences, President Marketing Club Hamburg With his book “Praxisorientiertes Marketing”, Ralf Kreutzer has written a marketing textbook that fulfils both the requirement of conveying sound theory and that of practical orientation. He leads the reader confidently and competently through the basics of marketing and always succeeds in presenting the subject matter in a lively manner and xi

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making it comprehensible with many examples. A well-structured, diverse, descriptive and very up-to-date book! The author encourages critical engagement with the content presented through the use of “mnemonic boxes” and “food for thought”. Very good! Prof. Dr. Sabine Haller, Berlin School of Economics and Law, Berlin The book offers an indispensable orientation in the ever faster changing everyday marketing. It provides implementation and practical know-how without getting lost in details. Every marketing student and marketer should master the contents. The author has competently integrated the current developments of digitalization as well as the further developments in online marketing into this work! To create already the 6th edition in such a short time proves the extraordinarily high interest that this work enjoys quite rightly! Univ.-Prof. Dr. Michael Lingenfelder, Philipps-Universität Marburg This book is already a marketing classic. Colleague Kreutzer succeeds excellently in illuminating the important and current aspects of marketing in a very well-structured manner and underpinning these with case studies. It is written very well understandable and therefore in my view a must read for every marketing decision maker. Prof. Dr. Tatjana Steusloff, Department of Wiesbaden Business School at RheinMain University of Applied Sciences Marketing managers are first and foremost networkers. They connect customers with the company again and again. Practical Marketing by Ralf T. Kreutzer provides the tools for future-proof marketing: clearly structured, vividly explained and exemplarily clarified. The expansion of the classic marketing mix to include the fifth P for personnel is particularly noteworthy. Because in the end, it is still the employees who make good marketing! For this purpose, the most important marketing approaches – from A for Aided Recall to M for Market Segmentation to Z for Target Definition – are clearly explained. With this book, market success is pre-programmed! Prof. Dr. Karsten Kilian, University of Applied Sciences Würzburg-Schweinfurt and Markenlexikon.com Marketing learning with fun – the objective formulated in the preface of Kreutzer himself is actually consistently implemented: Concise language, convincing thought leadership, vivid examples and goal-oriented transfer form an almost ideal basis to open up the world of marketing. And always up to date, which concerns for example the challenges of online marketing. Therefore, recommended for practitioners and students alike. Univ.-Prof. Dr. Klaus-Peter Wiedmann, Professor for Marketing and Management and Director of the Institute for Marketing & Management at Leibniz University Hannover A great book for anyone who lives fascinating marketing: Brilliantly clear structures, topicality and application reference form a perfect symbiosis together with your own creativity. Excellent for successfully bringing new ideas to the world. Dr. Astrid Martini, Lecturer Fresenius University of Applied Sciences in Munich

Contents

1 General  Basics of Marketing������������������������������������������������������������������������������   1 1.1 Conceptual Basics of Marketing������������������������������������������������������������������   2 1.1.1 What Is Marketing?��������������������������������������������������������������������������   2 1.1.2 How Has the Importance of Marketing Changed Over Time? ��������   8 1.1.3 Definition of Marketing��������������������������������������������������������������������  13 1.1.4 Types of Marketing ��������������������������������������������������������������������������  15 1.1.4.1 Differentiation According to the Profit-Making Intention of Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16 1.1.4.2 Differentiation According to the Focused Market . . . . . .  17 1.1.4.3 Differentiation According to Internal or External Marketing Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18 1.1.5 Barter Objects in Marketing��������������������������������������������������������������  18 1.1.5.1 Differentiation of Objects of Exchange According to Content or Type of Use . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19 1.1.5.2 Differentiation of the Objects of Exchange According to the Type of Available Information . . . . . . . .  20 1.1.5.3 Differentiation of Objects of Exchange According to Purchasing Behaviour . . . . . . . . . . . . . . . . . . . . . . . . . . .  21 1.1.5.4 Differentiation of the Objects of Exchange According to the Degree of Product Interest . . . . . . . . . . .  23 1.1.5.5 Differentiation of Exchange Items According to Branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24 1.1.6 Categories of Purchase Decisions����������������������������������������������������  29 1.1.7 Purchasing Behaviour of Organizations ������������������������������������������  32 1.2 Marketing Environment��������������������������������������������������������������������������������  36 1.2.1 Identification of Markets������������������������������������������������������������������  36 1.2.2 Macro-Environment of the Company ����������������������������������������������  41 1.2.2.1 Factors of the Political and Legal Environment����������������  41 1.2.2.2 Social, Cultural and Environmental Factors����������������������  42 1.2.2.3 Factors of the Economic Environment������������������������������  43 xiii

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1.2.2.4 Factors of the Technological Environment������������������������  43 1.2.3 Micro-Environment of the Company������������������������������������������������  45 1.3 Behavioural Factors Influencing Marketing�������������������������������������������������  46 1.3.1 Sociological Factors Influencing Purchasing Behaviour������������������  47 1.3.2 Psychological Factors Influencing Purchasing Behaviour����������������  50 1.3.2.1 Activation and Information Overload��������������������������������  50 1.3.2.2 Findings of Neuro-Marketing��������������������������������������������  56 References��������������������������������������������������������������������������������������������������������������  63 2 Marketing  Planning and Marketing Research��������������������������������������������������  67 2.1 Basics of Marketing Planning����������������������������������������������������������������������  67 2.1.1 Identification of Planning and Planning Processes ��������������������������  67 2.1.2 Formation of Strategic Business Units���������������������������������������������  70 2.1.3 Strategic and Operational Planning��������������������������������������������������  73 2.2 Tasks and Methods of Marketing Research��������������������������������������������������  75 2.2.1 The 5-D Concept of Marketing Research ����������������������������������������  76 2.2.1.1 Definition Phase ����������������������������������������������������������������  76 2.2.1.2 Design Phase����������������������������������������������������������������������  78 2.2.1.3 Data Collection Phase��������������������������������������������������������  82 2.2.1.4 Data Analysis Phase����������������������������������������������������������  93 2.2.1.5 Documentation Phase��������������������������������������������������������  94 2.2.2 Knowledge Targets of Marketing Research��������������������������������������  95 2.2.3 Important Methods of Marketing Research�������������������������������������� 100 2.2.3.1 SWOT Analysis������������������������������������������������������������������ 100 2.2.3.2 Portfolio Analysis�������������������������������������������������������������� 111 2.2.3.3 Benchmarking�������������������������������������������������������������������� 116 2.2.3.4 Value Chain Analysis �������������������������������������������������������� 120 2.2.3.5 Customer Journey Map������������������������������������������������������ 124 2.2.4 Marketing Research Before Product Launches and/or Communication Activities���������������������������������������������������������������� 128 2.2.4.1 Concept Testing and Product Testing�������������������������������� 128 2.2.4.2 Eye Tracking���������������������������������������������������������������������� 130 2.2.4.3 Test Market Studies������������������������������������������������������������ 131 2.2.5 Ongoing Marketing Research ���������������������������������������������������������� 132 2.2.5.1 Customer Surveys�������������������������������������������������������������� 132 2.2.5.2 Mystery Market Research�������������������������������������������������� 133 2.2.5.3 Panel Studies���������������������������������������������������������������������� 135 2.2.5.4 Special Market Research Concepts������������������������������������ 138 References�������������������������������������������������������������������������������������������������������������� 142 3 Marketing Targets������������������������������������������������������������������������������������������������ 145 3.1 Relevance and Functions of Targets�������������������������������������������������������������� 145 3.2 Requirements for the Formulation of Targets ���������������������������������������������� 147

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3.3 Corporate and Marketing Targets������������������������������������������������������������������ 152 3.4 Brand Value Chain as a Form of a Marketing Target System ���������������������� 158 3.4.1 Description of the Brand Value Chain���������������������������������������������� 158 3.4.2 Phases of the Brand Value Chain������������������������������������������������������ 165 3.4.2.1 Phase 1: Aided Recall�������������������������������������������������������� 165 3.4.2.2 Phase 2: Unaided Recall���������������������������������������������������� 166 3.4.2.3 Phase 3: Purchase Interest�������������������������������������������������� 168 3.4.2.4 Phase 4: Willingness to Buy���������������������������������������������� 169 3.4.2.5 Phase 5: Demand��������������������������������������������������������������� 170 3.4.2.6 Phase 6: Initial Purchase���������������������������������������������������� 172 3.4.2.7 Phase 7: Utilisation������������������������������������������������������������ 173 3.4.2.8 Phase 8: Post-purchase������������������������������������������������������ 174 3.4.2.9 Phase 9: Recommendation������������������������������������������������ 176 3.5 Embedding the Marketing Objectives in a Balanced Scorecard������������������ 179 3.5.1 Basic Concept of the Balanced Scorecard���������������������������������������� 179 3.5.2 Marketing Scorecard������������������������������������������������������������������������ 181 References�������������������������������������������������������������������������������������������������������������� 184 4 Marketing Strategy���������������������������������������������������������������������������������������������� 187 4.1 Definition of Strategy������������������������������������������������������������������������������������ 187 4.2 Strategic Concepts in Marketing������������������������������������������������������������������ 188 4.2.1 Competitive Strategies���������������������������������������������������������������������� 188 4.2.2 Customer-Oriented Strategies ���������������������������������������������������������� 195 4.2.2.1 Market Field Strategy�������������������������������������������������������� 196 4.2.2.2 Market Stimulation Strategy���������������������������������������������� 201 4.2.2.3 Market Segmentation Strategy������������������������������������������ 205 4.2.2.4 Market Area Strategy �������������������������������������������������������� 224 4.3 Business Model Canvas for Strategy Development�������������������������������������� 229 4.4 Strategic Challenge Metaverse���������������������������������������������������������������������� 232 4.4.1 Description of the Metaverse������������������������������������������������������������ 233 4.4.2 Precursors and First Manifestations of the Metaverse���������������������� 234 4.4.3 Elements for the Construction of the Metaverse������������������������������ 235 4.4.4 Does Metaverse Promise to Be More Successful than Second Life? ������������������������������������������������������������������������������������ 237 References�������������������������������������������������������������������������������������������������������������� 241 5 Marketing Tools��������������������������������������������������������������������������������������������������� 243 5.1 Product and Programme Policy�������������������������������������������������������������������� 243 5.1.1 Decision Fields of Product and Programme Policy�������������������������� 244 5.1.2 Extended Product Life Cycle as a Framework for Orientation�������� 247 5.1.2.1 Concept of the Product Life Cycle������������������������������������ 247 5.1.2.2 Creation Phase: Product Innovation Process �������������������� 249

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5.1.2.3 Market Presence Phase: Product Life Cycle in a Narrower Sense �������������������������������������������������������������� 269 5.1.2.4 Market Presence Phase: Product Modification Process ���� 272 5.1.2.5 Disposal Phase: Product Elimination Process������������������� 273 5.1.3 Brand Management�������������������������������������������������������������������������� 274 5.1.3.1 Brand Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 5.1.3.2 Brand Concepts and Brand Names . . . . . . . . . . . . . . . . . . 278 5.1.3.3 Product-Brand Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 279 5.1.4 Service Strategies������������������������������������������������������������������������������ 281 5.2 Price and Conditions Policy�������������������������������������������������������������������������� 284 5.2.1 Decision Fields of the Price and Conditions Policy�������������������������� 285 5.2.2 Concepts for Setting Prices�������������������������������������������������������������� 287 5.2.2.1 Cost-Based Pricing������������������������������������������������������������ 287 5.2.2.2 Demand-­Oriented Pricing�������������������������������������������������� 290 5.2.2.3 Competitive Pricing ���������������������������������������������������������� 297 5.2.3 Static Pricing Strategies�������������������������������������������������������������������� 299 5.2.3.1 Static Pricing and Conditions Instruments������������������������ 299 5.2.3.2 Price Differentiation as a Special Instrument of Static Price and Condition Setting ������������������������������������ 304 5.2.3.3 Compagnion Pricing as a Special Instrument of Static Price and Condition Setting ������������������������������������ 310 5.2.3.4 Special Forms of Static Pricing and Conditions���������������� 311 5.2.4 Dynamic Pricing Strategies�������������������������������������������������������������� 313 5.2.5 Cross-Product Aspects of Pricing and Conditions Policy���������������� 316 5.3 Distribution Policy���������������������������������������������������������������������������������������� 320 5.3.1 Decision Fields of Distribution Policy���������������������������������������������� 320 5.3.2 Sales Channels and Sales Institutions ���������������������������������������������� 321 5.3.2.1 Direct Sales������������������������������������������������������������������������ 322 5.3.2.2 Indirect Distribution���������������������������������������������������������� 325 5.3.2.3 Shifts in the Importance of Distribution Channels������������ 332 5.3.2.4 Multi-Channel or Omni-Channel Distribution������������������ 335 5.3.3 Management of Sales Channels and Sales Institutions�������������������� 338 5.3.4 Distribution Logistics������������������������������������������������������������������������ 341 5.4 Communication Policy���������������������������������������������������������������������������������� 345 5.4.1 Description of the Communication Policy���������������������������������������� 345 5.4.2 Targets, Target Groups and Information Fields of Communication Policy���������������������������������������������������������������������� 350 5.4.3 Instruments and Media of Communication Policy �������������������������� 356 5.4.3.1 Overarching Concepts of Communication Policy ������������ 356 5.4.3.2 Advertising������������������������������������������������������������������������ 371 5.4.3.3 Public Relations ���������������������������������������������������������������� 382

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5.4.3.4 Sales Promotion ���������������������������������������������������������������� 383 5.4.3.5 Direct Communication or Dialogue Communication�������� 385 5.4.3.6 Online Communication������������������������������������������������������ 400 5.4.3.7 Sponsorship������������������������������������������������������������������������ 407 5.4.3.8 Trade Fairs, Exhibitions, Events and Brand Presentations���������������������������������������������������������������������� 409 5.4.3.9 Lobbying���������������������������������������������������������������������������� 410 5.4.4 Communication Budgeting �������������������������������������������������������������� 411 5.4.5 Communication Policy Systems ������������������������������������������������������ 414 5.4.5.1 Corporate Identity�������������������������������������������������������������� 414 5.4.5.2 Customer Loyalty Systems������������������������������������������������ 418 5.5 Personnel Policy�������������������������������������������������������������������������������������������� 427 5.5.1 Plea for the “5th P” in the Marketing Mix���������������������������������������� 427 5.5.2 Concept for the Creation of Internal Branding �������������������������������� 438 5.5.2.1 Basic Considerations���������������������������������������������������������� 438 5.5.2.2 Leadership�������������������������������������������������������������������������� 440 5.5.2.3 Human Resources Management���������������������������������������� 446 5.5.2.4 Internal Communication���������������������������������������������������� 451 5.5.2.5 Supporting Internal Branding Systems������������������������������ 458 5.5.2.6 Impact Analysis of Internal Branding�������������������������������� 459 References�������������������������������������������������������������������������������������������������������������� 463 6 Development  of a Closed Marketing Concept�������������������������������������������������� 473 6.1 Preparation of a Strategic and an Operational Marketing Plan�������������������� 473 6.2 Assignment of Activities to the Product Life Cycle ������������������������������������ 476 Reference �������������������������������������������������������������������������������������������������������������� 478 7 Marketing Controlling���������������������������������������������������������������������������������������� 479 7.1 Labeling and Targets of Marketing Controlling�������������������������������������������� 479 7.2 Strategic Marketing Controlling ������������������������������������������������������������������ 483 7.3 Operational Marketing Controlling�������������������������������������������������������������� 484 References�������������������������������������������������������������������������������������������������������������� 491 8 Marketing Organization�������������������������������������������������������������������������������������� 493 8.1 Basics of Business Organization������������������������������������������������������������������ 493 8.2 Business Process and Organizational Structure�������������������������������������������� 494 8.3 Design of the Marketing Organization���������������������������������������������������������� 501 References�������������������������������������������������������������������������������������������������������������� 504 Glossary ������������������������������������������������������������������������������������������������������������������������ 505

About the Author

Ralf  T.  Kreutzer  has been Professor of Marketing at the Berlin School of Economics and Law since 2005. At the same time, he works as a trainer, coach and marketing and management consultant. He spent 15 years in various management positions at Bertelsmann (last position director of the foreign division of a subsidiary), Volkswagen (managing director of a subsidiary) and Deutsche Post (managing director of a subsidiary) before he was appointed professor of marketing in 2005. Through regular publications and keynote speeches (e.g. in Germany, Austria, Switzerland, France, Belgium, Singapore, India, Japan, Russia, USA), Prof. Kreutzer has provided significant impulses on various topics relating to marketing, dialogue marketing, CRM/customer loyalty systems, database marketing, online marketing, social media marketing, digital Darwinism, digital branding, dematerialisation, change management, digital transformation, artificial intelligence, agile management, strategic and international marketing, and has advised a large number of companies in Germany and abroad on these topics. In addition, Prof. Kreutzer works as a trainer and coach. His most recent book publications are “Dematerialization: The Redistribution of the World” (2015, together with Karl-Heinz Land), “Digital Darwinism: Branding and Business Models in Jeopardy” (2015, together with Karl-Heinz Land), “Digital Darwinism: The Silent Attack on Your Business Model and Brand” (2nd. Edition, 2016, together with Karl-Heinz Land), “Customer Relationship Management in the Digital Age” (2016), “Digital Business Leadership  – Digital Transformation  – Business Model Innovation  – Agile Organization  – Change Management” (2017, together with Tim Neugebauer and Annette Pattloch), “Leadership and Organization in the Digital Age Compact” (2018), “Digital Business Leadership, Digital Transformation, Business Model Innovation, Agile Organization, Change Management” (2018, together with Tim Neugebauer and Annette Pattloch), “Toolbox for Marketing and Management” (2018), “Toolbox for Marketing and Management” (2019), “Understanding Artificial Intelligence” (2019, together with Marie Sirrenberg), “Understanding Artificial Intelligence” (2019, together with Marie xix

xx

About the Author

Sirrenberg), “B2B Online Marketing and Social Media” (2nd ed. Ed, 2020, together with Andrea Rumler and Benjamin Wille-Baumkauff), “Voice Marketing” (2020, together with Darius Vousoghi), “The Digital Seduction” (2020), “Customer Dialogue Online and Offline” (2021), “Practice-Oriented Online Marketing” (4th ed., 2021), “Toolbox for Digital Business” (2021), “Social Media Marketing Compact” (2nd ed, 2021), “E-Mail-­ Marketing kompakt” (2nd ed., 2021), “Online-Marketing – Studienwissen kompakt” (3rd ed., 2021) and “Digitale Markenführung” (2021, together with Karsten Kilian).

Abbreviations

ag.ma Media analysis team AI Artificial intelligence amongst others And others amongst others Inter alia AOV Average order value ARC Law against restraints of trade ATL Above the line AUMA Exhibition and Trade Fair Committee of German Business AWA Allensbach market and advertising media analysis B2B Business-to-business B2B2B Business-to-business-to-business B2B2C Business-to-business-to-consumer B2C Business-to-consumer BDD Federal Association of Direct Selling Germany BSC Balanced scorecard BTL Below the line B-to-B Business-to-business B-to-B-to-B Business-to-business-to-business B-to-B-to-C Business-to-business-to-consumer B-to-C Business-to-consumer C2C Consumer-to-consumer CB Corporate behaviour CC Corporate communications CD Compact disc CD Corporate design CEC Commission on Concentration in the Media cf. Compare CI Corporate identity CLV Customer lifetime value CM Category Management xxi

xxii

Abbreviations

CMO Chief marketing officer CoC Code of conduct CPC Cost per coupon CPI Cost per interest CPL Cost per lead CPM Cost per mille CPM Thousand Contact Award CPO Cost per order CPR Cost per redemption CRM Customer relationship management CRR Customer retention rate CSR Corporate social responsibility C-to-C Consumer-to-consumer CTOR Click-to-open rate d. V. The author DAX German share index DB Contribution margin DDV German Dialogue Marketing Association DIW German Institute for Economic Research DMP Data management platform DR Direct response D-to-C Direct-to-consumer e.g. For example EA Efficient assortment EBIT Earnings before interest, tax EBITDA Earnings before interest, tax, depreciation and amortization EBT Earnings before tax ECR Efficient consumer response EDR Electrodermal response EEG Electroencephalogram EP Efficient promotions EPI Efficient product introduction ERP Efficient replenishment ERP Enterprise resource planning ESG Environment, social and governance esp. In particular EU European Union FAS Frankfurter Allgemeine Sonntagszeitung FAZ Frankfurter Allgemeine Zeitung FMCG Fast Moving Consumer Good FMOT First Moment of Truth fMRI Functional magnetic resonance imaging

Abbreviations

xxiii

FTD Financial Times Germany GAFA Google, Amazon, Facebook and Apple GDPR General Data Protection Regulation GDR German Democratic Republic generally speaking As a rule GfK Society for Consumer Research HGB Commercial code HR Human resource i. S. In line i.e. Viz. if necessary If applicable in general Basically in the sense of In that sense IPO Initial public offering IVW Information Association for the Determination of the Distribution of Advertising Media KPI Key performance indicator LAE Reader analysis decision makers LOHAS Lifestyle of health and sustainability m. E. In my point of view MERGERS AND ACQUISITIONS Mergers and acquisitions MStV State Media Treaty o. V. Bylined OEM Original equipment manufacturer OKR Operational key results PAF Price-sales function PAngV Price indication ordinance PET Positron emission tomography PF Purchase frequency PGR Psychogalvanic reaction POP Point of purchase POS Point of sale PPO Profitability per order PR Public relations QR Quick response regarding Regarding R&D Research and development respectively Respectively RFID Radio frequency identification ROAS Return on advertising spend ROCE Return on capital employed

xxiv

Abbreviations

ROI Return on investment ROMI Return on Marketing Invest ROS Return on sales RPV Revenue per visit RPV Revenue per visitor RR Redemption rate RStV Interstate Broadcasting Treaty RTB Real-time bidding SBU Strategic business unit SEA Search engine advertising SEO Search engine optimization SGF Strategic business area SMOT Second-moment-of-truth SoA Share of advertising SOEP Socio-economic panel SoV Share of voice SPI Strategic Planning Institute SWYN Share with your network TCO Total cost of ownership u. Ä. And the like u. U. Possibly UAP Unique advertising proposition UPP Unique passion proposition URL Uniform resource locator USP Unique selling proposition UWG Law against unfair competition UX User experience VDZ Association of German Magazine Publishers vfa German Association of Research-based Pharmaceutical Companies VKF Sales promotion VUCA Volatility, Uncertainty, Complexity, Ambiguity VuMA Consumption and media analysis WTO World Trade Organization z. B. For instance z. T. In part ZMOT Zero Moment of Truth

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 1.3 Fig. 1.4 Fig. 1.5 Fig. 1.6 Fig. 1.7 Fig. 1.8 Fig. 1.9 Fig. 1.10 Fig. 1.11 Fig. 1.12 Fig. 1.13 Fig. 1.14 Fig. 1.15 Fig. 1.16 Fig. 1.17 Fig. 1.18 Fig. 1.19 Fig. 1.20 Fig. 1.21 Fig. 1.22 Fig. 1.23 Fig. 1.24 Fig. 1.25 Fig. 1.26 Fig. 2.1 Fig. 2.2

Identification of seller’s and buyer’s markets������������������������������������������������ 5 Micro- and macro-environment of the company������������������������������������������ 6 Marketing management process�������������������������������������������������������������������� 8 Development of the importance of marketing���������������������������������������������� 9 Pyramid of marketing���������������������������������������������������������������������������������� 14 Marketing diamond ������������������������������������������������������������������������������������ 15 Typology of products and services according to type of available information�������������������������������������������������������������������������������������������������� 21 Labelling of offers according to purchasing behaviour������������������������������ 22 Labelling of offers according to product interest���������������������������������������� 23 Labelling of manufacturer’s brands, retail brands and no-name products�� 26 Relative quality and price positioning of different brand concepts������������ 28 From need to act of purchase���������������������������������������������������������������������� 30 Phases of an extensive purchase decision process�������������������������������������� 30 Buying center of purchasing behavior in organizations������������������������������ 34 Terms used to describe markets������������������������������������������������������������������ 37 Scheme of market forms ���������������������������������������������������������������������������� 39 Age structure of the population in Germany – 2021, 2040 and 2060 �������� 42 Private households by household size in Germany – in %�������������������������� 43 Schematic of the S-O-R model – stimulus, organism, response ���������������� 46 Factors influencing consumer buying behaviour���������������������������������������� 47 Relationship between activation and performance�������������������������������������� 51 Book cover with erotic stimuli. (Source: © Springer Fachmedien Wiesbaden GmbH)�������������������������������������������������������������������������������������� 52 Information overload as a determinant of buyer behaviour������������������������ 53 Attention span in comparison��������������������������������������������������������������������� 56 Pilot and autopilot modes of operation ������������������������������������������������������ 59 Emotion and motive systems���������������������������������������������������������������������� 60 Mindset of agile management �������������������������������������������������������������������� 69 Formation of strategic business units���������������������������������������������������������� 72 xxv

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Fig. 2.3 Fig. 2.4 Fig. 2.5 Fig. 2.6 Fig. 2.7 Fig. 2.8 Fig. 2.9 Fig. 2.10 Fig. 2.11 Fig. 2.12 Fig. 2.13 Fig. 2.14 Fig. 2.15 Fig. 2.16 Fig. 2.17 Fig. 2.18 Fig. 2.19 Fig. 2.20 Fig. 2.21 Fig. 2.22 Fig. 2.23 Fig. 2.24 Fig. 2.25 Fig. 3.1 Fig. 3.2 Fig. 3.3 Fig. 3.4 Fig. 3.5 Fig. 3.6 Fig. 3.7 Fig. 3.8 Fig. 3.9 Fig. 3.10 Fig. 3.11 Fig. 3.12 Fig. 3.13 Fig. 3.14 Fig. 3.15 Fig. 3.16

List of Figures

5-D concept of marketing research ������������������������������������������������������������ 77 Basic concept of the Net Promotor Score �������������������������������������������������� 84 Delphi method�������������������������������������������������������������������������������������������� 87 Types of sampling �������������������������������������������������������������������������������������� 91 Basic approach of success factor research�������������������������������������������������� 96 Experience curve effect������������������������������������������������������������������������������ 97 Further explanatory factors of ROI development���������������������������������������� 99 Basic concept of the SWOT analysis�������������������������������������������������������� 100 Result of the analysis of strengths and weaknesses���������������������������������� 103 Johari window for self and company analysis������������������������������������������ 104 Basic concept of Porter’s 5-forces analysis���������������������������������������������� 106 SWOT matrix – synthesis of the external and internal perspectives in the context of the SWOT analysis�������������������������������������������������������� 110 Example of a SWOT synthesis from the consumer goods market������������ 111 Basic concept of the BCG portfolio analysis�������������������������������������������� 112 Different product portfolios as triggers for corporate development���������� 113 Market attractiveness-competitive advantage portfolio���������������������������� 114 Technology portfolio�������������������������������������������������������������������������������� 117 Step-by-step concept of a benchmarking approach���������������������������������� 119 Basic concept of a value chain������������������������������������������������������������������ 121 Example of a customer journey – from online and offline to noline�������� 126 Basic concept of a customer journey map������������������������������������������������ 127 Everyday studio. (Source: Concept M, 2021)������������������������������������������ 129 Eye tracking using the example of a mailing�������������������������������������������� 131 Calculation of EBITDA���������������������������������������������������������������������������� 154 Hierarchical target system of a company�������������������������������������������������� 156 Visualization of target relationships���������������������������������������������������������� 157 Marketing target system���������������������������������������������������������������������������� 158 Triggers for and activities of users in the conversion funnel�������������������� 159 Core phases of the brand value chain�������������������������������������������������������� 159 Dominant factors along the brand value chain������������������������������������������ 162 Positioning of the ZMOT�������������������������������������������������������������������������� 163 Brand identity and brand image���������������������������������������������������������������� 164 Brand steering wheel�������������������������������������������������������������������������������� 165 Network of relationships within the available set ������������������������������������ 167 Reduction of “passivity” in favour of “activity” along the brand value chain���������������������������������������������������������������������������������������������������������� 171 Profit increase potential through regular customers���������������������������������� 175 Operationalisation of customer loyalty ���������������������������������������������������� 175 Confirmation-disconfirmation concept for determining satisfaction levels���������������������������������������������������������������������������������������������������������� 176 Motivating and demotivating factors along the brand value chain����������� 177

List of Figures

Fig. 3.17 Fig. 3.18 Fig. 3.19 Fig. 4.1 Fig. 4.2 Fig. 4.3 Fig. 4.4 Fig. 4.5 Fig. 4.6 Fig. 4.7 Fig. 4.8 Fig. 4.9 Fig. 4.10 Fig. 4.11 Fig. 4.12 Fig. 4.13 Fig. 4.14 Fig. 4.15 Fig. 4.16 Fig. 4.17 Fig. 4.18 Fig. 4.19 Fig. 4.20 Fig. 4.21 Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5 Fig. 5.6 Fig. 5.7 Fig. 5.8 Fig. 5.9 Fig. 5.10 Fig. 5.11 Fig. 5.12 Fig. 5.13 Fig. 5.14 Fig. 5.15 Fig. 5.16

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Kano model of customer satisfaction�������������������������������������������������������� 178 Basic concept of the balanced scorecard for a company�������������������������� 180 Marketing scorecard for customer relationship management ������������������ 181 Strategy types according to Porter������������������������������������������������������������ 190 Thrust of a competitive overtaking strategy���������������������������������������������� 194 Customer-oriented strategies�������������������������������������������������������������������� 195 Product-market matrix – Ansoff matrix���������������������������������������������������� 196 Forms of diversification���������������������������������������������������������������������������� 201 Classical layer model of a market ������������������������������������������������������������ 202 Grid for the design of the market stimulation strategy����������������������������� 202 Forms of market segmentation������������������������������������������������������������������ 207 Selected criteria for market segmentation in the B2C market������������������ 210 Selected criteria for market segmentation in the B2B market������������������ 212 Persona foundation document ������������������������������������������������������������������ 216 Concept of the customer relationship life cycle���������������������������������������� 217 Core processes of marketing automation�������������������������������������������������� 218 Triad of customer support ������������������������������������������������������������������������ 219 Selected criteria to describe own prospects and customers in the B2C market ������������������������������������������������������������������������������������ 221 Decision fields of the market area strategy ���������������������������������������������� 224 Strategies for international expansion ������������������������������������������������������ 225 Waterfall strategy for international product launch���������������������������������� 227 Sprinkler strategy for international product launch���������������������������������� 228 Concept of the business model canvas������������������������������������������������������ 230 Elements for the contruction of the Metaverse ���������������������������������������� 236 Process for shaping product and programme policy �������������������������������� 244 Concept of the extended product life cycle���������������������������������������������� 248 Classification of innovations �������������������������������������������������������������������� 250 Selected triggers and sources of the innovation process �������������������������� 251 Waterfall concept�������������������������������������������������������������������������������������� 254 Mindset of agile management ������������������������������������������������������������������ 254 Time-to-market������������������������������������������������������������������������������������������ 255 Time-to-value�������������������������������������������������������������������������������������������� 256 Merging design thinking, lean start-up and Scrum ���������������������������������� 257 Attribute listing for the development of a textbook���������������������������������� 259 Subjective evaluation of the advantages and disadvantages of innovations������������������������������������������������������������������������������������������������ 260 Analysis grid for innovations�������������������������������������������������������������������� 260 Closed innovation model�������������������������������������������������������������������������� 261 Open innovation model ���������������������������������������������������������������������������� 262 Company-customer interaction in the innovation process������������������������ 262 Funnel model for the evaluation and selection of new product ideas ������ 264

xxviii

Fig. 5.17 Fig. 5.18 Fig. 5.19 Fig. 5.20 Fig. 5.21 Fig. 5.22 Fig. 5.23 Fig. 5.24 Fig. 5.25 Fig. 5.26 Fig. 5.27 Fig. 5.28 Fig. 5.29 Fig. 5.30 Fig. 5.31 Fig. 5.32 Fig. 5.33 Fig. 5.34 Fig. 5.35 Fig. 5.36 Fig. 5.37 Fig. 5.38 Fig. 5.39 Fig. 5.40 Fig. 5.41 Fig. 5.42 Fig. 5.43 Fig. 5.44 Fig. 5.45 Fig. 5.46 Fig. 5.47 Fig. 5.48 Fig. 5.49 Fig. 5.50 Fig. 5.51 Fig. 5.52 Fig. 5.53 Fig. 5.54

List of Figures

Scoring model for new product evaluation ���������������������������������������������� 265 Break-even analysis���������������������������������������������������������������������������������� 267 Diffusion model for innovations �������������������������������������������������������������� 270 Decision factors for a modification or elimination of products���������������� 274 Primary and secondary brand elements���������������������������������������������������� 275 Advantages of single-brand and multi-brand strategies���������������������������� 275 Design options for brand strategies���������������������������������������������������������� 276 Brand hierarchy at Beiersdorf ������������������������������������������������������������������ 278 Orientation points for finding brand names���������������������������������������������� 278 Product-brand portfolio of Alphabet �������������������������������������������������������� 279 Services as part of the product and programme policy ���������������������������� 281 Factors influencing and shaping price and conditions policy ������������������ 285 Ideal typical price-sales function�������������������������������������������������������������� 291 Price change in the elastic range of the price-sales function�������������������� 292 Price change in the inelastic range of the price-sales function ���������������� 293 Effects of price on purchase probability �������������������������������������������������� 297 Competitive pricing – longer-term orientation������������������������������������������ 298 Discount types������������������������������������������������������������������������������������������ 300 Options for coupon development�������������������������������������������������������������� 301 Types of price differentiation�������������������������������������������������������������������� 305 Servitization: from product to service – from service to service�������������� 312 Dynamic pricing strategies������������������������������������������������������������������������ 313 Influencing factors and decision fields of distribution policy ������������������ 321 Basic forms of sales���������������������������������������������������������������������������������� 322 Turnover with goods in online retail in Germany until 2020 (in € billion)���������������������������������������������������������������������������������������������� 323 Tasks to be covered in sales���������������������������������������������������������������������� 324 Different types of wholesale �������������������������������������������������������������������� 326 Forms of retail ������������������������������������������������������������������������������������������ 327 Formats of stationary retail – I������������������������������������������������������������������ 328 Formats of stationary retail – II���������������������������������������������������������������� 329 Share of retail in private consumer spending in Germany by 2019���������� 332 Sales area productivity of the leading food retail sales lines in Germany 2018 and 2019 – gross sales per square metre�������������������������� 333 Market shares of manufacturer and private labels in Germany by brand category from 2013 to 2020������������������������������������������������������������ 334 Basic concept of multi-channel distribution �������������������������������������������� 335 Exemplary assignment of channels to the individual phases of a purchase and usage cycle in the omni-channel concept���������������������������� 338 Criteria for the selection of sales channels and sales institutions ������������ 339 Conflicting targets in the sales channel���������������������������������������������������� 340 Strategies of efficient customer response�������������������������������������������������� 341

List of Figures

Fig. 5.55 Fig. 5.56 Fig. 5.57 Fig. 5.58 Fig. 5.59 Fig. 5.60 Fig. 5.61 Fig. 5.62 Fig. 5.63 Fig. 5.64 Fig. 5.65 Fig. 5.66 Fig. 5.67 Fig. 5.68 Fig. 5.69 Fig. 5.70 Fig. 5.71 Fig. 5.72 Fig. 5.73 Fig. 5.74 Fig. 5.75 Fig. 5.76 Fig. 5.77 Fig. 5.78 Fig. 5.79 Fig. 5.80 Fig. 5.81 Fig. 5.82 Fig. 5.83 Fig. 5.84 Fig. 5.85 Fig. 5.86 Fig. 5.87 Fig. 5.88 Fig. 5.89 Fig. 5.90 Fig. 5.91 Fig. 5.92 Fig. 5.93

xxix

Logistics value chain�������������������������������������������������������������������������������� 342 Process for designing the communication policy�������������������������������������� 346 Decision fields of communication policy�������������������������������������������������� 348 Communication process���������������������������������������������������������������������������� 349 Delimitation of marketing, communication and advertising�������������������� 350 Target groups of corporate communication���������������������������������������������� 352 Push and pull strategy ������������������������������������������������������������������������������ 353 Audience market shares of TV channels in Germany in April 2021�������� 353 Selected advertising media and advertising materials������������������������������ 357 Market shares of media types in the gross advertising market 2021�������� 357 Patterns of communication strategies – example television – I���������������� 364 Patterns of communication strategies – example television – II �������������� 364 Multisensory marketing���������������������������������������������������������������������������� 367 Brand building through branding and brand-related communication ������ 369 Daily usage time of selected media in Germany 2020 – in minutes�������� 377 Types of sales promotion�������������������������������������������������������������������������� 384 Fields of application of mobile marketing from the company’s point of view��������������������������������������������������������������������������������������������� 388 From QR code to website�������������������������������������������������������������������������� 391 Forms of online marketing������������������������������������������������������������������������ 401 Process of content marketing�������������������������������������������������������������������� 404 Fields of action and impact of rating and review management���������������� 405 Factors influencing viral campaigns initiated by companies�������������������� 407 Fields of action for the development of a corporate identity�������������������� 415 Drivers of customer loyalty���������������������������������������������������������������������� 418 Key questions for developing a customer loyalty strategy������������������������ 422 Concept of internal branding to achieve a brand-oriented behavior �������� 428 Paradigm shift in personnel management ������������������������������������������������ 430 Placing the Gallup questions in a pyramid of needs �������������������������������� 431 Results on employee engagement in Germany ���������������������������������������� 432 Share of economic sectors in total employment in Germany – 1950–2020������������������������������������������������������������������������������������������������ 434 Ensuring a balance between sales and customer orientation among employees and managers�������������������������������������������������������������� 434 Starting points for achieving uniqueness�������������������������������������������������� 435 Passion-driven marketing excellence turbine�������������������������������������������� 436 Cornerstones of brand-oriented behavior�������������������������������������������������� 436 Strategic qualification gap������������������������������������������������������������������������ 438 SIIR model of a brand-oriented change process �������������������������������������� 440 Start with the “Why”!�������������������������������������������������������������������������������� 441 Instruments for building brand-oriented behavior������������������������������������ 442 Impacts of transactional and transformational leadership������������������������ 443

xxx

Fig. 5.94 Fig. 5.95 Fig. 5.96 Fig. 5.97 Fig. 5.98 Fig. 5.99 Fig. 5.100 Fig. 5.101 Fig. 5.102 Fig. 5.103 Fig. 6.1 Fig. 6.2 Fig. 6.3 Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 7.4 Fig. 7.5 Fig. 7.6 Fig. 8.1 Fig. 8.2 Fig. 8.3 Fig. 8.4 Fig. 8.5 Fig. 8.6 Fig. 8.7 Fig. 8.8 Fig. 8.9 Fig. 8.10

List of Figures

Characteristics of the brand citizenship behavior ������������������������������������ 445 Iceberg model of performance������������������������������������������������������������������ 446 Dialogue is to be established on two levels���������������������������������������������� 448 Factors of the factual and relationship level���������������������������������������������� 448 Portfolio for the analysis of the customer orientation of employees�������� 449 Impact chain of internal communication�������������������������������������������������� 452 Design of dialogical communication in the company������������������������������ 455 Instruments of internal communication���������������������������������������������������� 456 Brand identification portfolio�������������������������������������������������������������������� 460 Engagement portfolio for the relationship between employee and customer engagement ������������������������������������������������������������������������ 461 Structure of a strategic marketing plan ���������������������������������������������������� 474 Structure of an operational marketing plan���������������������������������������������� 476 Ideal-typical allocation of operative marketing activities – oriented to different phases of the product life cycle���������������������������������������������� 477 Functions of marketing controlling���������������������������������������������������������� 480 Concepts of a comprehensive controlling approach �������������������������������� 482 Closed loop of marketing controlling ������������������������������������������������������ 485 Selected questions of an instrument audit of the marketing diamond������ 486 ABC analysis of the product range ���������������������������������������������������������� 487 Age structure analysis of a product range (in the bars is mentioned the “number of products”)������������������������������������������������������������������������������ 489 Organizational chart of a company ���������������������������������������������������������� 495 Influencing factors and decision fields of organizational development���� 497 Basic form of a product-oriented organization ���������������������������������������� 498 Basic form of a functional organization���������������������������������������������������� 498 Basic form of a customer-oriented organization �������������������������������������� 499 Basic form of a matrix organization���������������������������������������������������������� 500 Basic form of a functional marketing organization���������������������������������� 501 Basic form of a product-oriented marketing organization������������������������ 502 Basic form of a customer-oriented marketing organization���������������������� 502 Basic form of a marketing matrix organization���������������������������������������� 503

1

General Basics of Marketing

And in every beginning there is a magic that protects us… and who helps us to live! Hermann Hesse Learning Objectives

Ability, • • • • • • • •

to recognize marketing in its various manifestations to trace the development of marketing to distinguish between different marketing concepts to determine marketing-relevant influencing factors to identify different categories of products and their relevance for marketing use to apply terms to describe markets to grasp market forms and their implications for marketing to understand behavioural aspects of marketing and take them into account when designing marketing activities • to take into account the findings of neuro-marketing • to master the differences between B2B and B2C marketing

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 R. T. Kreutzer, Practice-Oriented Marketing, https://doi.org/10.1007/978-3-658-39717-3_1

1

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1  General Basics of Marketing

1.1 Conceptual Basics of Marketing 1.1.1 What Is Marketing? A look at the hit list of the most valuable brands in 2021 shows that Apple, a brand that has interwoven the online and offline worlds in a particularly convincing way for users, has landed in first place. Apple has succeeded in building up an eco-system to inspire customers with ever new products and services and thereby keep them “captive” in its own environment. In second place is Amazon, a company that has consistently developed new service areas with its focus on customer obsession – an almost exaggerated customer orientation. In third place is Microsoft, a company that has earned this spot through an impressive realignment. In fourth place is Google, a company that originally started as a pure search engine and has consistently developed its offering. The Korean electronics group Samsung is in fifth place. The frontrunners in the brand ranking are all active in the hardware and software industry as well as in the service sector. The “classic” industries, such as automotive companies and classic brand manufacturers, are only ranked in the following places. Coca-Cola was ranked first for many years, but is now “only” in sixth place (cf. Interbrand, 2021). A high brand value often goes hand in hand with a high market or stock market capitalization. The market capitalization indicates how high the value of a company is estimated in the eyes of investors – measured by the level of the share price. Consequently, to determine the stock market value, the number of shares in circulation must be multiplied by the respective share price. In April 2021, Apple’s stock market value was over two trillion US dollars. Amazon was valued at 1.6 trillion US dollars, Microsoft at 1.9 trillion US dollars and Alphabet – the parent company of Google – at 1.5 trillion US dollars. These companies are thus among the most valuable in the world. cc

Memory Box  A decisive value driver is marketing – and as part of it – also brand management!

Which brands from Germany made it into the world’s top 100? Here we can find Mercedes-Benz, BMW, SAP, Allianz, Audi, Volkswagen, Adidas, Porsche and Siemens – highlighting the importance the automotive industry for Germany in 2021. Compared to the stock market values already mentioned, the German groups generate only comparatively low stock market values: SAP € 126 billion, Daimler € 80 billion and BMW € 57 billion – as of April 2021 (cf. Interbrand, 2021). Here, too, marketing and brand management are decisive value drivers. The brand equity of the companies results from the relevance of the brand for the customer’s purchase decision process. In tests it is repeatedly found that in a blind tasting, i.e. when the consumer does not know which cola he or she is drinking, Pepsi-Cola usually tastes best. However, the result is quite different if the consumer has the information about

1.1  Conceptual Basics of Marketing

3

which cola she or he drinks; then Coca-Cola suddenly tastes better (o. V. 14.10.2004; cf. in more detail Sect. 1.3.2.2). Consequently, this means that the brand name and the image built up through various advertising measures influence the consumer’s taste experience. This shows the importance of brand and communication policy as one of the tasks of marketing. If more people around the world are consuming movies and music through streaming in 2021, it will be a result of the evolution of offerings from companies like Amazon, Disney+, Netflix, and Spotify. These can relate to both products and services. Here, the exciting possibilities of a convincing product policy become visible as another field of action for marketing. We are wooed daily – online and offline – with price advantages, discount coupons and other special offers. The objective is to motivate us to make a purchase as quickly as possible. The instruments used here belong to another field of marketing activity: pricing policy. The strongest brand, a convincing product and attractive pricing alone are not enough to succeed. Customers must also have a way to purchase the products. This is the task field of distribution policy as another pillar of marketing. It is about presenting the entrepreneurial offers where the customers expect them – online and/or offline. The Ritz-Carlton hotel group has been convincing guests for years with its excellent service quality, which is far above average. One of the main reasons for this is that special importance is attached to the employees of the hotels in terms of selection, qualification and training, and this is ensured by appropriate quality management. Every employee is required to have the credo and principles of Ritz-Carlton, which are documented in a folder the size of a business card, “on hand” at all times. This is to ensure that the “spirit of the house” is always present. The Service Values (Ritz-Carlton, 2021) state: I am proud to be Ritz-Carlton

1 . I build strong relationships and create Ritz-Carlton guests for life. 2. I am always responsive to the expressed and unexpressed wishes and needs of our guests. 3. I am empowered to create unique, memorable and personal experiences for our guests. 4. I understand my role in achieving the key success factors, embracing community footprints and creating The Ritz-Carlton Mystique. 5. I continuously seek opportunities to innovate and improve The Ritz-Carlton experience. 6. I own and immediately resolve guest problems. 7. I create a work environment of teamwork and lateral service so that the needs of our guests and each other are met. 8. I have the opportunity to continuously learn and grow. 9. I am involved in the planning of the work that affects me. 10. I am proud of my professional appearance, language and behavior.

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1  General Basics of Marketing

11. I protect the privacy and security of our guests, my fellow employees and the company’s confidential information and assets. 12. I am responsible for uncompromising levels of cleanliness and creating a safe and accident-free environment. Additionally, Ritz-Carlton (2021) has a motto that always excites me: We are ladies and gentlemen serving ladies and gentlemen.

This motto exemplifies the forward-looking service provided by all employees. Here, the importance of the employees as central service providers and thus also of the personnel policy as an essential pillar of marketing becomes clear. All of these activities ultimately aim to create a positive customer experience (CX) in order to motivate customers to make a long-term commitment. This is also referred to as user experience (UX). cc

Memory Box  Customer experience refers to the experiences of a customer at the various customer touchpoints of a company, i.e. at the POS, on the website, in the online shop, in the service center, etc.

Marketing activities are always very closely linked to corporate strategies. After all, all of a company’s strategies serve – directly or indirectly – to create value for customers and thereby also for the company. This connection becomes particularly clear when companies go public, because the initial public offering (IPO) represents a corporate strategy decision. Its implementation involves marketing tasks to a large extent, such as the communication necessary for the IPO to attract interested investors. It is also necessary to show in which business areas the company wants to be active and which marketing strategies are to be used. The more market-­oriented a company is, the stronger the connection between corporate and marketing strategies. cc

Memory Box  Marketing is much more than advertising, which is omnipresent to us as consumers or end users.

Marketing first of all – if you analyze the term marketing – the “market” and thus the customers are the focus. These can be consumers or companies as buyers. Here we are talking about sales markets, i.e. markets in which products or services are sold. A focus on the sales markets is particularly necessary if these represent the bottleneck of the entrepreneurial activity. In this case, the sale of goods does not occur “by itself”, as was the case in Germany in the post-war period. At that time, it was not sales that were the bottleneck, but the procurement of raw materials and production. Because at that time the “seller” in the sense of the offering company (be it the manufacturer itself or a dealer) was in the dominant market position, we speak of a seller’s market. The products are virtually snatched out of the seller’s hands by the customers –

1.1  Conceptual Basics of Marketing

5

Characteristic

Sellers‘ market

Buyers‘ market

Stage of economic growth

Economy of scarcity

Affluent/prosperous society

Relation between supply and demand

Demand > supply (excess demand)

Demand < supply (excess supply)

Bottleneck and thus focus of enterprise

Procurement, manufacturing

Marketing, sales

Primary challenge of enterprise

Increase of procurement and Activation and control of production capacities demand

Focus of activity

Buyer is more active than seller

Seller is more active than buyer

Fig. 1.1  Identification of seller’s and buyer’s markets

which is why the seller gives this market form its name. The other characteristics associated with a seller’s market are shown in Fig. 1.1. In today’s developed industrial nations, however, it is no longer the seller who represents the bottleneck, but the buyer. This is why we speak of the so-called buyer’s market. Here the buyer has the dominant market position – and that is why the “buyer” here gives this market form its name. The buyer decides which product he buys, which price he accepts, via which distribution channel (e.g. online shop or department store) she buys and from which communicative approach and service quality she feels attracted. Sales marketing provides the necessary answers to these questions. The dominance of buyers’ markets in the developed industrial nations has led to the following developments: Marketing as a basic entrepreneurial orientation (i.e. the orientation of the company to the requirements of the market) became the guiding principle in more organizations. In order to implement this orientation, marketing was installed as an operational sub-function (partly as a separate department or as an integrated area in the company organization). What is so aptly said in relation to economically developed countries in a thesis? cc

Memory Box  We don’t have a shortage of products today, we have a shortage

of needs!

Today, it is often not only sales markets that represent a bottleneck for entrepreneurial activity. Procurement markets can also become a bottleneck if, there is a lack of qualified and highly motivated employees in certain industries (keywords “war for talents”, shortage of skilled workers). Raw materials such as clean water, rare earths (these are certain

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Fig. 1.2  Micro- and macro-environment of the company

metals) or oil can also become (temporarily) scarce. Therefore, it is necessary that marketing also focuses on the procurement markets. This is called procurement marketing. But even this broader perspective is no longer sufficient for the design of marketing today. What is required is the alignment of entrepreneurial activities and thus also of marketing with the requirements of the so-called micro and macro environment (cf. Fig. 1.2). The areas listed must be “examined” on a company-specific basis to determine which of the influencing factors to be assigned there have an effect on the company’s activities and which are to be taken into account in the design of the company’s activities. In concrete terms, this means that in addition to the sales and procurement markets (direct and indirect customers, suppliers), competitors and their activities must also be taken into account in the micro-environment. Today, virtually no competing company can structure its activities without taking the relevant competitors into account. Also the investors, be it real shareholders or the banks financing through loans, must be taken into account with their interests in the implementation of marketing. Through the discussion of shareholder value, i.e. the creation of value for the shareholders, their interests have been particularly brought into focus and the company management has been called upon to work especially on an increase in value for this target group (see further Rappaport, 1998). Today, however, taking into account the requirements of different interest groups in the micro-environment is no longer sufficient to be able to operate successfully on the market in the long term. The macro-economic environment is also placing increasing demands on the company. These requirements range from the wishes of political decision-makers and parts of the active public with regard to the creation and preservation of jobs, to the promotion of the national economy through the establishment of additional locations, to the consideration of ecological requirements, to the transfer of certain technologies to emerging countries.

1.1  Conceptual Basics of Marketing

7

Against this background, the shareholder concept, which unilaterally makes the shareholders the point of orientation for entrepreneurial action, has been further developed into the stakeholder concept. Stakeholders are not “shareholders” in the legal sense, as the literal translation of “to have a stake in something” would lead one to expect. Rather, in a figurative sense, it is about the fact that other groups are also interested in the company’s activities and must therefore be considered as relevant target groups. It is important to take their different interests and demands on the company into account when designing marketing (cf. Wiesner, 2020). In some literature, the analysis of the macro-environment is also referred to as PEST analysis or PESTEL analysis. PEST as an acronym stands with “P” for “Political”, “E” for “Economic”, “S” for “Social” and “T” for “Technological”. In the case of PESTEL, the “E” for “Environmental” and “L” for “Legal” are added (cf. in-depth information on the corresponding analysis in Chap. 2). Against the background of the developments described above, marketing is characterized as an entrepreneurial management concept that should permeate all areas of a company (cf. Meffert et  al., 2019, pp.  12 f.; Homburg, 2020, pp.  6–11; Bruhn, 2019, pp. 14–16; Weis, 2018, pp. 21–29; Kotler et al., 2017, pp. 10 f.). Marketing uses the following “tools” for this purpose: • Information gathering and processing tools and analysis (as part of market and marketing research), • Planning systems for the definition of marketing goals, for the derivation of marketing strategies as well as for the design of various marketing instruments (specifically price, product, communication, distribution and personnel policy, which together form the marketing diamond in a concrete design), • Implementation and controlling systems for the implementation of marketing activities or for the monitoring of processes as well as the achievement of objectives (marketing controlling), • Organizational concepts to anchor marketing in the corporate structure (marketing organization). These tools converge in the process of marketing management, as Fig. 1.3 shows. Here it becomes clear that marketing controlling should critically analyze the entirety of marketing and should not be limited to a control of results at the end of a business year (cf. Chap. 7). Such a comprehensive concept of controlling is not only relevant for companies. The systems and processes used can also be applied in their basic features to a student at university or as an expression of “lifelong learning” at work: • What goals do I personally want to achieve? Am I concerned with the pure acquisition of knowledge or am I aiming for specific grades and degrees (such as a bachelor’s or master’s degree, the academic degree of MBA or a doctorate)? Or should the fun factor dominate?

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Fig. 1.3  Marketing management process

• On which paths and thus through which strategies do I want to realize these goals – through distance learning, evening studies or full-time studies? • Do I want to shape the daily learning process and thus the implementation as a lone wolf or as a team player (e.g. with learning groups)? Do I actively participate in the lectures or am I a passive learner? • What is the organization of my studies? What times do I reserve for learning? In which premises do I study – in the library, at home? • How is my learning progress monitored? This entire process is particularly successful if the needs of the working world have been analysed beforehand and it has been determined which key qualifications are demanded by the economy by intensively evaluating job offers and relevant literature. cc

Memory Box  Marketing management comprises the process of marketing research in order to define the marketing objectives, the marketing strategies, the marketing instruments as well as the process for implementation in a planning process. The implementation process is carried out by the marketing organization and monitored by marketing controlling with regard to the achievement of the defined goals.

1.1.2 How Has the Importance of Marketing Changed Over Time? In the identification of seller’s and buyer’s markets, it has already become clear that marketing has not always held such a dominant position as it does today. Using Germany as an example, we will show how the corporate focus has shifted over the past decades (see Fig. 1.4).

1.1  Conceptual Basics of Marketing

Product perspective

Mass market perspective

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Trade marketing

Strategic marketing

Trade perspective

Strategic perspective

Interactive marketing/CRM

Customer rentention perspective

Global marketing/ CRM/Online marketing Global perspective

Digitalisation/ networking/ CRM Digital perspective

Trend towards „sustainability“ Affluent society Consumer society

Digitalisation

Society of depriviation Dominance of sales markets 50s

60s

Dominance of buyer markets 70s

80s

90s

2000s

2010s

Time

Fig. 1.4  Development of the importance of marketing

In the post-war period, the focus was initially on securing basic supplies for the population, since for the vast majority “… a few slices of bread, perhaps a dab of margarine, two small potatoes, some milk soup …” (Wiegrefe, 2005, p. 48) had to suffice as daily rations. Thus, entrepreneurial activities were dominated by a product perspective. At that time, agricultural and industrial production capacities, which were only just being built up, were confronted with huge demand – across sectors. There was a huge pent-up demand for clothing, food, furniture, housing, entertainment, and so on. This product perspective and the underlying shortage found particular expression in ration cards and other ration coupons, which alone entitled people to purchase certain products. During the so-called hoarding journeys of city dwellers to farmers in the surrounding countryside, attempts were made to exchange furs, cutlery or jewellery for basic food such as flour, potatoes or eggs. Other vendors preferred to offer their products on the black market rather than deliver them at fixed prices. After all, many billions of Reichsmark were matched only by a very reduced supply of goods. This immense excess of purchasing power was only overcome by the currency reform on June 20th, 1948, when each person received 40 Deutsche Mark and savings balances were drastically devalued. In many areas the D-Mark replaced the cigarette as currency. Care packages from the USA also helped to alleviate supply shortages in post-war Germany. The overcoming of the economy of scarcity was demonstrated by the abolition of food rationing and ration cards. This took place in 1950 in the West and in 1958 in the East of Germany. The release of a large part of the prices ensured that producing and selling was worthwhile again. In the following years, this led to a progressive build-up of production capacities, so that a mass market perspective gradually took center stage. The aim of many companies was to produce as large quantities of identical products as possible at low cost for a mass market in order to ensure that large sections of the population were supplied.

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In West Germany, the 500,000th Beetle rolled off the assembly line at Volkswagen on July 3rd, 1953, with the standard model costing DM 4150. The millionth Beetle was celebrated there as early as 1955. At the same time, 6 million new homes were built for 16 million people. This economic upswing was promoted, among other things, by a very high motivation of the population to overcome the emergency situation as well as by a 6-day week with a holiday entitlement of 2 weeks a year (cf. Wiegrefe, 2005, pp. 59–61, 47). In the GDR, production of the Trabant began in Zwickau in 1957, and by 1991 some 3.1 million units had been sold – technically largely unchanged over the decades and with an almost identical appearance. However, the average citizen in the GDR had to wait around 12  years for the “Trabi”. GDR citizens also had to be patient when it came to “planned housing”. The average processing time for such applications was 5 years. The period of the developing consumer society in West Germany saw some of the founding and major growth phases of the universal mail order companies Quelle (founded in 1927), OTTO (founded in 1949) and Neckermann (founded in 1950; first edition of the Neckermann catalogue 100,000 copies). The mail order companies initially supplied the market with a uniform range of products. The main catalogues of the mail-order companies, published twice a year, were an expression of this mass marketing. At the same time, there were a few large media channels aimed at broad target groups. In the television market these were ARD and ZDF – the so-called first and second channels. There were no more programmes at that time. Also, there was no round-the-clock broadcasting. The dominant magazines were HÖRZU (first edition 1946), Der Spiegel (first edition 1947) and Stern (first edition 1948). In the 1960s “… West Germans roared through new housing estates on Vespas or chugged along in Goggomobils, where refrigerators and washing machines were often already standard. They make cooking easier with an electric cooker, watch the ‘Tagesschau’ on television and commute to work from the suburbs in the morning. 1-2-3-4 is the explanatory formula of this world: one spouse, two children, three rooms, four wheels” (Wiegrefe, 2005, p. 61). As production capacities continued to be built up and additional companies – increasingly also from abroad – became involved, the production bottleneck was overcome in many areas in the 1970s. Now a new bottleneck emerged: trade. Due to an increasing range of goods and services offered by the emerging affluent society, trading companies assumed an increasingly important intermediary position between manufacturers and customers. More suppliers, usually with the involvement of retail companies (such as department stores and supermarkets), sought the way to the customer. Shelf space in retail was and still is a scarce commodity. Consequently, it became a priority task of the retail trade to select the relevant products for the respective target group from the multitude of products offered. The bottleneck of trade in connection with its access to the end customer led to the emergence of a new word: trade power. Due to its position of power, the trade was able to decide freely to a large extent which goods were included in the offer. This power was also clearly visible in the enforcement of

1.1  Conceptual Basics of Marketing

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supply conditions against manufacturers. Even though trading power “emerged” in that decade, its importance in many areas has remained intact or grown even further up to the present day. This is clearly visible in the concentration of the large retail chains in Germany. The market share of the largest four suppliers  – Edeka, Rewe, Aldi and the Schwarz Group with Lidl and Kaufland – is now more than 85%. The dominant market leader is Edeka. This company has more than 100,000 food stores and a turnover of more than € 55 billion. It is easy to imagine the purchasing power these companies can wield over large manufacturers such as Beiersdorf, Procter & Gamble and Unilever. You can easily imagine how little influence local dairies can then bring to bear in price negotiations! In the 1980s, increasing competition brought the strategic perspective to the forefront of marketing. Companies were forced to decide on the long-term direction of the company much more than before. Increasingly international competition also contributed to this. Central concepts of corporate strategy were introduced. These include portfolio analysis, the basic concept of which was developed by the Boston Consulting Group in the 1970s. The works of Michael Porter brought competitive analysis more into focus. As competition for customers had to be fought with increasingly sophisticated technology, strategic marketing was born. A key influencing factor was also the demand for more ecologically oriented marketing, which emerged on a broad front for the first time. The change in expectations was underpinned by a change in values in parts of the critical public. This was helped by the newly founded Green Party at the beginning of 1979. Its core demands were gradually taken up by the major parties. Companies began to draw up so-called eco-balances, in some cases for the entire company or for individual products, in order to be able to better communicate their environmentally conscious actions to the outside world. With the development of the Internet as a mass communication medium in the 1990s, a veritable Internet hype initially began. At its peak, the general survival of the “old economy” was called into question by the Internet-based “new economy”. Conferences and seminars were held under the title “Old economy meets new economy”. This should make it clear that two very different philosophies clash here. In the case of many Internet start-ups, success was initially measured in “cash-burning rates”, oriented to the question: How long does it take the company to destroy the money gained through an IPO by the business model? However, here  – and later  – the thesis proved true once again: Technology Changes, Economic Laws Don’t! Finally, after the collapse of the Internet bubble, the slogan changed to “Old economy eats new economy”. The supposedly outdated business models of the past used Internet technology as a tool. In the form of interactive marketing, mail order companies, publishing houses, stationary trade and airlines made use of the new communication and distribution channels. Only a few of the newly founded companies at the time  – such as Amazon, eBay, Google, Zappos – managed to become dominant (global) players.

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1  General Basics of Marketing

Parallel to this, another development took place, which shifted the focus from customer acquisition towards customer loyalty. The reasons for this were, on the one hand, the trend towards a general decline in customer loyalty. Even satisfied customers were changing “their” supplier frequently because customers “enjoyed variety”. Many buyers were less and less satisfied with uniform and thus interchangeable product quality. On the other hand, the costs for customer acquisition were continuously rising. Many more companies were guided by the findings that it costs seven to nine times more to acquire a new customer than to retain an existing one. Therefore, many companies began to shift budgets from acquisition to support. The whole trend was and still is called CRM (Customer Relationship Management). This trend found its clearest expression in the founding of company-specific customer loyalty programmes (such as Lufthansa Miles & More, Mercedes Card) as well as in cross-company customer loyalty programmes, the most successful of which is the Payback system. With the abolition of the Rebate Act and the Ordinance on Bonuses in June 2001, the legislator had created an important legal framework for this development (cf. on CRM Kreutzer, 2021a). The developments of the last decades are still having an impact on the current corporate reality. The demands of customers and the general public with regard to corporate responsibility have been reflected, among other things, in the discussion about corporate social responsibility (CSR) of companies. CSR refers to the social responsibility perceived by companies, which describes the voluntary contribution assumed by companies to sustainable economic activity that goes beyond mere orientation to legal regulations (cf. Wiesner, 2016; on corresponding KPIs Krause, 2016). At the same time, almost all companies are feeling the effects of globalization. This can be seen in the migration of their customers to foreign suppliers, the increasing demand for scarce raw materials and the competition from products and services from low-wage countries. Examples include children’s toys and textiles from China and software development as well as call center services from India. At the same time, globalisation opens up the possibility for companies to produce (more cheaply) in other countries or to sell their own services there. These developments have led to increasing prosperity in many countries of the world over the past decades. The phase in which we find ourselves today is characterized by ever more widespread digitization and networking – even across industry boundaries. New business models – often developed by start-ups – have the potential to displace many previously successful and established companies. Amazon has already succeeded in doing so with Quelle (liquidation in 2009) and Neckermann (insolvency in 2012). The offerings of Airbnb, Uber and Tesla are challenging the previous top dogs in their traditional business fields! This is where the phenomenon of digital Darwinism comes into play. The selection process thus described rewards the companies that can quickly adapt to the changed conditions. Those that do not adapt are – as has often already happened – weeded out by the market (cf. in Kreutzer & Land, 2015, 2016; Kreutzer, 2022). The motto here is:

1.1  Conceptual Basics of Marketing

13

Adapt or Die! In addition, companies have to prove themselves professionally in the online sector in general and especially in social media. This is where it is increasingly decided which companies will win the battle for customers. In order to provide a convincing service, more extensive cooperation – possibly even with strategic competitors – is often required. At the same time, there is an increasing demand for companies to focus their entire activities more strongly on sustainability. Not least as a result of the “Fridays for Future” movement, more and more companies are being forced to take so-called ESG criteria into account in their activities. This abbreviation stands for Environment, Social and Governance. It is used primarily by investors to evaluate the behavior of companies in terms of the environment, social issues and corporate governance. Institutional investors – and thus also those for whom they make their money available – are in some cases no longer only concerned with profit when investing money, but increasingly also with sustainability. For this reason, they are already increasingly examining what social or ecological consequences are associated with an investment. In addition, it is analysed whether the decision-makers act according to the rules of good corporate governance. Companies that stand out negatively in this regard will be punished by investors and customers alike.

1.1.3 Definition of Marketing Today, in view of the developments outlined, marketing is characterized as a concept of market-oriented corporate management (cf. Becker, 2019, pp. 1–4; Meffert et al., 2019, p. 12 f.; Homburg, 2020, pp. 1387–1389). Here, “market” is not to be understood solely as a synonym for “sales market”. “Market” is an expression for all areas in which – via market mechanisms  – a regulated exchange with other service providers takes place. This exchange takes place in the following areas: • Sales market, concretized by companies and/or consumers as buyers on the one hand and suppliers competing with each other on the other hand. • Procurement market, e.g. for the acquisition of raw materials, energy, supplier parts, machines, but also for the acquisition of capital, licenses and employees; here, too, the companies are in competition – but as “buyers”. In addition, other interest groups (stakeholders) must be taken into account, whose influence on the company’s activities must be considered and, if necessary, actively shaped (e.g. through PR and lobbying work): • General public Here, it is a question of the acceptance of nuclear energy or wind turbines, gene products and new technologies. • Legislative

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The legal framework conditions have an impact on research opportunities and the establishment of industries. In addition, subsidies or tax benefits can be used to deliberately promote selected projects, e.g. the production of “green hydrogen”. This is hydrogen that has been produced using renewable energies. • Cooperation partner Today, many challenges can only be mastered jointly  – even by large companies. Examples include autonomous driving or the development of a cross-border data and cloud solution for a European digital ecosystem (keyword “Gaja-X project”). The development of foreign markets may also make cooperation necessary. • Employees One frequently neglected stakeholder group is the company’s own employees. They not only contribute to value creation within the company. They can also have an effect outside the company  – as brand ambassadors, so to speak  – and promote image and sales. When describing marketing further, it makes sense to use a pyramid as a guide (cf. Fig. 1.5). First, the marketing objectives are to be defined at the top of the pyramid. Here, the “desired locations” to be achieved are determined (cf. Chap. 2). To achieve these goals, marketing provides various marketing strategies. These can be understood as “routes to the desired locations” (cf. Chap. 4). The strategies in turn have a lasting influence on the use of the so-called marketing instruments. Here, one can speak of the “choice of means of transport” (cf. Chap. 5; so also Becker, 2019, p.  4 f.). These instruments are often divided into the following categories: • • • •

Product and programme policy Price and conditions policy Communication policy Distribution policy

Marketing targets „Determinination of desired location“

Marketing strategies “Defining the route to the desired location”

Marketing instruments „Choosing means of transport“

Fig. 1.5  Pyramid of marketing

Where do we want to go?

How are we getting there?

What instrument are we making use of?

1.1  Conceptual Basics of Marketing

15

In my opinion, limiting marketing instruments to these categories of the so-called marketing mix  – often referred to as the “4 Ps” (Product, Price, Promotion, Place)  – is too short-sighted. There are several reasons for this. On the one hand, it can be seen that in national economies such as Germany, the proportion of employees in the service sector is continuously increasing. On the other hand, it is becoming increasingly important for many companies to differentiate themselves from competitors by offering convincing services. Focusing on products alone is no longer sufficient for this. cc

Memory Box  The time is ripe for the inclusion of a “5th P” in the marketing mix. This P stands for People and is intended to express the ever-increasing importance of a company’s employees for its success.

This turns the marketing mix into a marketing diamond (cf. Fig. 1.6). Since all services of a company and consequently also those in marketing are directly or indirectly dependent on the creativity, the motivation and the potential of “the personnel”, in my opinion personnel policy even deserves the central position there. cc

Memory Box  Marketing characterizes the concept of market-oriented cor-

porate management and comprises the planning, organization, implementation and control of all market-oriented activities. Marketing can thus be understood both as a guiding principle of management and as a corporate function (alongside procurement, production, human resources, etc.).

1.1.4 Types of Marketing The basic orientation of marketing and the underlying values and principles are referred to as the marketing philosophy. Together with the strategies and instruments of marketing

Price

Communication Personnel

Distribution

Fig. 1.6  Marketing diamond

Product

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1  General Basics of Marketing

already briefly mentioned, this philosophy shapes entrepreneurial action. In order to show how this characterization turns out, different types of marketing are presented in the following.

1.1.4.1 Differentiation According to the Profit-Making Intention of Enterprises With regard to the profit-making intention of a company, a distinction must be made between so-called business or commercial marketing and non-profit or non-commercial marketing. If a company has an intention to make a profit, this is referred to as business marketing. Here, marketing is used with the aim of generating a profit for the company. Examples include Adidas, Apple, Beiersdorf, Deutsche Bank, dm Drogeriemarkt, Galeria, Google, Meta, Montblanc, Tesla and Volkswagen. cc

Food for Thought  We should distinguish between “good profits” and “bad profits”

in everything we do as a company! Perhaps confusing at first glance, since profits are  – actually  – always something good. But no: We achieve Good Profits with convincing services that our customers are willing to pay for. Bad profits are made when we take more money from customers than they would normally have to pay for the service by making non-transparent, confusing or even unfair offers. This includes subscription contracts that are difficult to understand and unclear terms and conditions. If a customer is “highly advised”, i.e. seduced into more expensive offers and enticed to buy significantly more than planned, then this also carries risks. Such measures can increase profits – at least in the short term. However, if the customer is left with a “stupid feeling”, feels badly treated or even cheated, then these are bad profits. Profits that can lead to a loss of customers in the long term. We should consistently avoid such bad profits in marketing and sales. Fairness Is a Good Navigator Here! Non-profit businesses, unlike for-profit businesses, have the following objectives, among others: • Social objectives Aktion Mensch (e.g. care for disabled people); UNICEF (worldwide alleviation of children’s suffering); Amnesty International (aid for prisoners); Federal Ministry of Health (e.g. on alcohol and nicotine abuse, AIDS prevention and prevention of social media burnout) • Environmental objectives BUND, Greenpeace, WWF • Faith-based objectives Churches • Educational and cultural objectives Museums, theatres, opera houses, colleges, universities • Policy objectives Parties, trade unions, associations.

1.1  Conceptual Basics of Marketing

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These non-profit institutions do not focus on making a profit. Rather, the aim is to change behaviour, to provide a cultural offer and/or to draw attention to disproportions in order to ideally eliminate them. They can also aim to achieve common goals. In order to achieve these goals, non-profit organizations are also dependent on cash flows. Such cash flows are triggered by appealing for donations. This process is called fundraising. The companies acting in this way are called fundraisers.

1.1.4.2 Differentiation According to the Focused Market If the marketing instruments are used on the sales market, this is referred to as sales marketing. If the marketing is oriented towards the procurement market, it is referred to as procurement marketing. Here, the focus is on the procurement of resources that a company needs for its value creation. These can be particularly q­ ualified employees (for administration and teaching), who are specifically recruited in the course of university marketing. In the production area, qualified specialists or managers are needed. In the case of procurement marketing, the focus can also be on access to technologies, to sources of raw materials or to economic development measures and tax advantages for a company’s settlement. A further differentiation is based on the different sales markets themselves. If the focus is on consumers, we speak of business-to-consumer marketing (B-to-C or B2C). Examples of this are McDonald’s and Aldi, which primarily address consumers with their marketing. cc

Memory Box  The term consumers is consistently used for the target group

addressed here. These people consume products and services. This means that they do not use these goods to create other products and services.

If the marketing is aimed at companies as customers, this is referred to as business-to-­ business marketing (B-to-B or B2B). This is the case in the relationship between Volkswagen and its suppliers, specifically Continental for tires and Bosch for vehicle electronics. Volkswagen buys products here in order to produce its own products with them. It is therefore not a question of consumption, but of productive use. cc

Memory Box  Therefore, in B2B marketing, we should always speak of cus-

tomers and not consumers.

These concepts are further developed in the form of B2B2B marketing or B2B2C marketing. This is a particularly elegant form of customer orientation. When designing marketing, the focus is not only on the expectations of direct customers, but also on the expectations of our customers’ customers (indirect customers). If a supplier also takes the needs of indirect customers into account, he or she can ideally make a more convincing offer to the direct customers. In this case, it is not a matter of “pushing the products onto the shelf”, but of helping the direct customer with further marketing. In this way, valuable customer relationships can often be built up in the long term (cf. Kreutzer, 2021a). In recent years, one form of marketing has gained in importance: consumer-to-­ consumer marketing (C-to-C or C2C). This involves the structuring of business

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1  General Basics of Marketing

r­ elationships directly between consumers. Consumer-to-consumer markets are promoted by the Internet because it enables easy contact and business transactions between private individuals. Companies also operate corresponding platforms to bring together private individuals as suppliers and consumers. Amazon Marketplace, eBay and Zalando Zircle, but also Airbnb come to mind here. These platforms enable C2C marketing. However, it should be noted that professional traders or companies are also active on these platforms. This part then belongs either to B2C or B2B marketing.

1.1.4.3 Differentiation According to Internal or External Marketing Orientation The orientation of marketing, especially towards the market, but also towards the other fields of the micro- and macro-environment and thus external marketing, is already daily business for the vast majority of companies. In contrast, many companies still have a lot of catching up to do in terms of internal marketing. By such an orientation of the marketing inwards, here in particular the entrepreneurial communication, employees are to be informed about the strategic orientation and the central goals of the enterprise at an early stage. This should prevent employees from finding out about the company’s existential decisions (e.g. staff reductions and relocations) from the press. It is demotivating for the employees (e.g. in a customer service center) if they are not provided with information about planned promotions in advance. In this case, customers who contact the company via chat, social media or telephone are better informed than the employees in charge. Due to the increasing competitive pressure and the associated “wooing of every single customer”, the importance of internal marketing will increase in the future. For this reason, personnel policy has been integrated into the marketing diamond as an independent instrument (cf. Sect. 5.5). One task is to turn the company’s own customers into brand ambassadors.

1.1.5 Barter Objects in Marketing Marketing can refer to various objects of exchange (in the sense of the objects of market exchange processes). Their characteristics have a decisive influence on the use of the various marketing methods. These objects of exchange are differentiated according to the following criteria: • • • • •

Content/type of use Method of obtaining information Purchasing behaviour Degree of product interest Branding

1.1  Conceptual Basics of Marketing

19

1.1.5.1 Differentiation of Objects of Exchange According to Content or Type of Use With regard to the content or type of use, a distinction must be made between consumer and industrial goods on the one hand and services on the other. Consumer goods are physical products. These are purchased by individuals or private households in order to put them to a consumptive use. This means that these products are intended for own use or consumption and are not subject to commercial use. This includes detergents and textiles as well as the privately used smartphone and the car used by the individual. As already mentioned, we are talking about consumers here. Industrial goods, which are sometimes also called capital goods, are the physical products acquired by individuals or organizations that are used to produce material goods or services (cf. Backhaus & Voeth, 2014, pp. 3–6; also Seebacher, 2021). These products are put to productive use. Examples include production facilities and factory buildings, but also detergents, textiles, smartphones and cars that are integrated into production processes. It becomes clear that there are industrial goods that are “by nature” intended for commercial use. These include production plants and factory buildings. These are referred to as born industrial goods. For other products, the classification as consumer or industrial goods depends on the type of use. If a dry cleaner buys detergents, a hospital white polo shirts, a consulting firm smartphones and Deutsche Post cars for the mail delivery staff, these are also industrial goods. To be more precise, these are designated industrial goods, because it is only the type of use that makes the product an industrial good. A specific feature of industrial goods is that they are derived requirements. This means that the products to be procured depend on the end product to be produced by the purchasing company. Which detergent a dry cleaner has to buy depends on its range of services. Which vehicles Deutsche Post wants to purchase depends on the services to be provided. This is why we speak of “derived demand”. Services are non-physical goods. Here, we can think of consulting a company, the planning of a house by an architect, the use of a hairdresser, a visit to a restaurant, the development of an advertising campaign, city cleaning or the teaching of students (cf. Haller & Wissing, 2020). It should be noted, however, that these services are sometimes accompanied by tangible products. Management consulting is often concluded with a presentation and/or concept paper that is also printed out. The service of an architect is a building plan documented in writing. A hairdresser’s service and a restaurant service also produce a “tangible” result. Nevertheless, the non-objective part dominates in many cases. This also becomes clear in the example of an insurance policy. The paper on which the life insurance policy is printed out represents only the contractual basis for a benefit into which payments must be made over decades in order to ideally receive a financial benefit for further decades. Services can also serve either a productive or a consumptive use. A visit to a restaurant can be a private rendezvous or a business meal. An architect’s work may be devoted

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1  General Basics of Marketing

to a private home or an office building. A visit to the hairdresser can prepare the appearance of Daniel Radcliffe or Emma Watson at a gala – or precede one’s own wedding. Some peculiarities of services lie in the fact that they are highly dependent on people. A hairdresser’s appointment without my presence is just as unsuccessful as a lecture without an audience (apart from recordings). Furthermore, services are generally not “storable”. For example, hotel rooms or restaurant tables that were not used yesterday. One should rather refrain from a double use the day after! In many cases, services are only generated at the time of consumption. This applies to live concerts or coaching sessions. Here we speak of the “Uno-actu” principle – the process of generation and use takes place without interruption, virtually in one act. These aspects must be taken into account when designing service marketing.

1.1.5.2 Differentiation of the Objects of Exchange According to the Type of Available Information Objects of exchange can also be differentiated according to the form in which information about them can be obtained. In the case of a search good, a potential buyer can obtain information about the quality of the offer before making a purchase. A look in the trunk of a car is enough to determine its size. The term “search goods” is therefore used to describe goods whose characteristics and properties can be easily assessed before purchase. These include carpeting, clothing, furniture, shoes and jewelry. One speaks of an experience good when the quality can only be determined after use. This is the case with the use of a tablet PC or a smart TV, but also with a streaming service provider, because the advantages and disadvantages of these goods only become apparent in daily use. The quality of the service provided by a hairdresser or a restaurant can also only be recognised in the process itself. Here, users can consequently only achieve learning effects in the course of using services, which have an impact on future purchasing behaviour. The characteristics of an experience (especially the quality) can therefore hardly be evaluated in advance. In the experience itself, however, the quality can be recognized very well. A trusted good is a product or service whose quality cannot be determined with certainty even after purchase or use. This category includes all food supplements (such as vitamin pills). Many forms of medical treatment, car repairs (e.g. replacement of brake discs) and home maintenance services (e.g. plumbing) are also trustes goods. In the case of a trusted good, it is difficult or impossible to determine the benefits for the customer even after purchase or during or after use or consumption. Here there is often an asymmetrical information situation between the customer and the service provider. In many cases, the user simply has to trust that the (supposed) specialists are doing a good job. The different categories are shown in Fig. 1.7. Household dishwashing brushes belong to the group of search goods. Here, a first good impression of the quality can be gained during the purchase. The situation is quite different for a visit to a restaurant. Here we are dealing with an experience good. The premises, which can be evaluated before ordering and before enjoying a meal, say nothing about the service and the taste of the food. This

1.1  Conceptual Basics of Marketing Share of trust qualities

Household dishwashing brushes are a search good Household dishwashing brushes Share of search qualities 100 %

21

100 % Doctor’s visit

A doctor’s visit is a trusted good A visit to a restaurant is an experience good Restaurant visit

Share of experience qualities 100 %

Fig. 1.7  Typology of products and services according to type of available information

only becomes apparent in the course of the experience. A visit to the doctor is a matter of trust. The doctor can be so friendly and sympathetic, the practice rooms can be equipped to a high standard and radiate the aura of a five-star hotel. Whether the doctor is a charlatan or a brilliant healer can often only be determined later – often after years. The relevance of this classification lies in the fact that the search for information in the acquisition of search, experience and trusted goods is quite different in order to make at a good purchase decision. Companies have to take this into account in their communication accordingly (cf. Nelson, 1970, p. 311 f.; Weiber & Adler, 1995, p. 107).

1.1.5.3 Differentiation of Objects of Exchange According to Purchasing Behaviour With regard to purchasing behaviour, different categories can also be distinguished. There are impulse purchases (also called spontaneous purchases). In these cases, the customer decides to make a purchase spontaneously and thus unplanned – stimulated by the specific offer. Not only the offers of sweets at the cash registers in the trade should contribute to this, but also secondary placements of products. Secondary placement refers to another placement of a product in the same store – parallel to the “standard placement” on the shelf. Tchibo’s value proposition, “a new world every week”, is intended to arouse curiosity and also motivate customers to make spontaneous purchases. This also applies to the discounters’ weekly changing hard goods offers. After all, the products on offer today will no longer be on sale next week. Since many millions of consumers “drop by” every week at Aldi, Lidl, Tchibo & Co., with the willingness to “strike” at suitable offers, one can speak in my opinion of an only seemingly contradictory planned impulse purchase. Here, the willingness to impulsively buy is actually planned (cf. summarising Fig. 1.8). Convenience goods are products that focus on the convenience of shopping. However, the same term is also used for products that focus on convenience during preparation

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1  General Basics of Marketing

Criterion Planning intensity Financial input Purchase frequency Degree of habitualization

Impulse products No planning Low Depending on offer Differs

Convenience goods Low Low Periodic High

Shopping goods High High Infrequent  Low  Careful comparison of offers  Open to buying impulses and information

Specialty goods High High Infrequent  Low  Intensive search for an already known supplier/ product  Price comparison regarding the same offer

Offer preference

None

Given

Open for suitable offers

Given

Goal of the buyer before the purchase

None

Convenience in shopping

Shopping for fun

Search for a specific offer

Examples

     

Chewing gum Jam Chocolate Nutella Tchibo products Striking, appealing presentation of products at the POS  “Spark” should jump spontaneously  Strong brand helpful  Surprise customers with offer

   

Consequences from a supplier's point of view

Many foods Sweets Cigarettes Daily newspaper

      High availability (ubiquity)   Reduce purchasing resistance (e.g. easy to  find)  Service/consulting not  relevant

Furniture Partly clothing Shoes Consumer electronics Cars Selective distribution channels possible Attracting attention to the POS Service/consulting is partly expected

Furniture Partly Clothing Shoes Consumer electronics Cars Selective distribution channels possible  Service/consultation is not necessarily expected, as preferences are already available  Confirmation of selection rather helpful      

Fig. 1.8  Labelling of offers according to purchasing behaviour

(e.g. ready meals, frozen pizzas, packet soups). However, these are not meant here. Since the customer buys the first-mentioned products regularly, he or she does not want to spend a lot of time searching and selecting. Therefore, these products are bought habitually. Habitualized means that the purchase process has become a routine, a habit. Thus, a consumer does not compare every time he or she buys yoghurt which brand with which fat content in which packaging size with which flavour etc. should be chosen. They reach for Fruchtzwerge or Landliebe or opt for Weihenstephan – because they have done this more often and were satisfied. As in other fields, the habitualisation of behaviour leads to a reduction in complexity and thus saves time and “mental energy”. From the supplier’s point of view, it is important here that these products are easy to find and, if possible, always in stock. Consistent quality and a trust-building price strategy also contribute to the desired habitualization. Many convenience goods belong to the group of fast moving consumer goods (FMCGs). These “fast-moving” consumer goods have only a short period of use (such as food, personal care products, pet food, drinks) and therefore have a high purchase frequency. Durable goods in the sense of long-lasting consumer goods, such as TV sets, smartphones and tablet PCs, are to be distinguished from these. Shopping goods that are bought less frequently and are often in the higher price segment (e.g. suits, shoes, furniture). Customers tend to be willing to invest more time and energy in shopping. The customer compares different offers, visits different shopping locations and is open to information and advice. The preference system is not yet fixed. Therefore, an appealing product presentation and good service at the POS – online as well as offline – can contribute to the formation of these preferences. POS stands for point of sale, e.g. a retail store or an online shop. In some cases, POP is also referred to as the point of purchase.

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The only difference between shopping goods and specialty goods is that in the latter case the customer’s preference system has already been formed. In the case of specialty goods, the customer has decided on Camper shoes and is now looking for them in various retail formats. If he or she does not find them in one shoe store or online shop, he or she goes to the next one. However, one must not overstretch the patience of the customer. If the products are too rare to find, this can also be interpreted as a lack of attractiveness of the product and lead to a reconsideration of one’s own preferences. It is important to be aware that these classifications only represent tendencies that are relevant for the definition of target groups in the course of market segmentation (cf. Sect. 4.2.2.3). For individuals or certain groups, food can also become a specialty good if very specific suppliers are preferred (e.g. Lacroix sauce stock or Demeter flour). It can also happen that a purchase process that was previously based on convenience is suddenly carried out with more care and consideration because certain foods come into disrepute due to food scandals.

1.1.5.4 Differentiation of the Objects of Exchange According to the Degree of Product Interest Offers can also be differentiated according to the degree of product interest on the part of customers. A distinction is made here between low-interest and high-interest products. Low-interest products are goods of daily use to which customers do not attach great importance – also due to the frequently low price. These include jam, margarine and fruit juice. High-interest products are those to which customers pay more attention for various reasons. This is the case, when looking for a flat or a job, when buying expensive furniture and cameras or when buying a car (cf. Fig. 1.9). Criterion Subjectively perceived purchasing risk

Low-interest products Low

High-interest products High

Amount of financial expenditure

Low

High

Visibility of consumption to the outside

Low

High

Influencing the purchase decision

Low

High

Example

 Sweets  Electricity  Butter

 Cars  Outerwear  Financial investments  Holiday trips  IT equipment  University programme

Consequences from a customers´ perspective

 Weak activation  Superficial involvement with product information  Low self-participation

 High activation  Active information gathering  High self-participation

Consequences from a supplier perspective

Interest in the offer often has to be created first

Provider can rely on active customers

Fig. 1.9  Labelling of offers according to product interest

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The risk of making a wrong decision is of particular importance in the eyes of the customer. The higher this is, the more value the potential buyer places on a careful decision-­making process. This category often includes the purchase of higher-quality or “more daring” clothing, cars, household electronics and IT equipment that will be used for several years. Services, such as financial investments or insurance, as well as the choice of university, also fall into this category. However, it is also true here that this classification only represents tendencies. Food can also represent high-interest products for particularly nutrition-conscious consumers, because only organically grown products with a seal of quality are consumed. In contrast, clothing can be bought by these solely by price from the rummage table. From the company’s point of view, this product classification is relevant for the question of how much time and energy the customer wants to invest in dealing with the offer. With low-interest products, the willingness to do so is limited. Here the customer wants to find, not search. With high-interest products, an actively searching customer can be assumed.

1.1.5.5 Differentiation of Exchange Items According to Branding Before going into branding, it is first necessary to clarify the concept of the brand itself. Various elements can be used to build the brand. These include the name, terms used, colours, illustrations, signs, symbols, logos (visual/acoustic), scents or a combination of these. Through the brand, an offer should become identifiable and at the same time distinguish itself from the competition. On the one hand, brands make a decisive contribution to the identification of offers and thus provide an orientation aid for purchases. On the other hand, in order to stand out positively from competing offers, the brand must be associated with bundles of ­benefits that are relevant for the customer. The totality of these tasks is referred to as brand management or branding (for further definitions, see Meffert et al., 2019, p. 265 f.; Baumgarth, 2014, pp. 1–7; Burmann et al., 2018; Esch, 2017; Kilian, 2021; Schmidt, 2016; on digital branding Kilian & Kreutzer, 2022). For the owners of the brand rights (manufacturers and/or trading companies), the following brand management objectives are central: • Legal protection against unauthorized use of the own brands • Building brand loyalty among customers by ensuring that their own offering is recognizable in the competitive environment • Creating a price premium through an attractive brand, where customers are willing to pay a higher price for a branded product (depending on the type of brand positioning) • A differentiated market approach becomes possible. The focus of communication is then not on an entire product group, but on a specific brand. For customers, the following functions of the brand are relevant: • Guidance Branding makes it easier for customers to identify a specific offer and thus helps them to make their choice.

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• Quality indicator Depending on its positioning, the brand makes a contribution as a quality indicator. This ranges from a pair of Primark trousers for € 5.95 (in simple quality) to H&M trousers (in simple to medium quality) to Armani trousers (with a high quality standard, e.g. in terms of material and fashionable cut). Through the positioning of the brand, the quality of the product is inferred. • Trust function Brands can reduce purchase uncertainty if they convey a specific promise. This can range from “inexpensive” (e.g. in the case of ja! products) to “extremely high quality” (e.g. in the case of Dom Pérignon champagne). The risk of a wrong purchase is thus reduced in the eyes of the buyer by selecting a certain brand. • Image/prestige function Customers can – in the case of brands with a high image and prestige – derive a psychological benefit from the use of the brand itself in their own eyes or in those of the respective reference group and thereby “elevate” themselves, as it were. This can be achieved by owning a Lange & Söhne watch or an Apple laptop. The brand can thus make an important contribution to the differentiation of products through the type of branding (cf. Sect. 5.1.3). At this point, three classes of particular relevance to the retail trade in Germany are presented: • Manufacturer’s brands • Retail brand • No-names Figure 1.10 summarises the key differences between these classes. Manufacturer’s brands are products that are distinguished by a branding and/or a brand name and thus have a uniform appearance – often across national borders and over longer periods of time. They are characterised by high quality or, more precisely, by their own high quality standards, which correspond to a relatively high price. The “relative” refers to the competitive offers. The “sender” of the branded goods is the manufacturing company which designs and produces the branded goods or has them produced (therefore called manufacturer’s brand). The majority of well-known brands belong to this category. Their manufacturers try to win over the target persons for their products by means of comprehensive advertising measures and have thus achieved a high level of awareness in many cases. The responsibility for retail brands lies with the retail companies themselves. Retail brands are also referred to as the branded articles of the retailers because they fulfil many characteristics that also apply to manufacturer’s brands. They have a clear branding and their own brand name. They are also indistinguishable from branded products in terms of packaging. In terms of price and, as a rule, also quality, they are usually positioned below the manufacturer’s brands. However, both the discounters and the traditional food retailers are increasingly trying to establish higher-quality private labels. At Lidl these are positioned under the brand Deluxe and at Rewe under the brand Rewe Feine Welt.

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Criterion Labelling

Manufacturer´s brands  Brand name for individual products/product groups  These brands are often the driving force behind innovations that are often “copied” by retail brands

Retail brands No-names  Brand name for individual  Same branding for a variety of products/product groups products from different categories  “Copy” often successful  Individual products within the manufactures´ brands categories do not have an own  Today also partly as innovators on brand name the market  “Copy” often successful and fastmoving manufacturers´ brands

Relative quality/quality standard

Striving for hight or the highest quality High/hightest price Usually in different distribution channels

Medium to high/highest quality

Relative pricing Availability „Sender“ of product Targets of the sender

Examples

Medium to high/highest price Concentration on a distribution channel or on channels of a trading group Manufacturer Retailer  Ensuring the recognition of your  Ensuring the recognition of the own offers own offer  Differentiation of own offerings in  Differentiation of the own offer in the environment of other retailers the competitive environment of other manufacturers and retailers and in relation to manufacturers  Emotional charge of the offer  Emotional loading of the offer  Customer’s loyalty to its own sales  Binding of the customer to the own product channel  Habitualization of the purchasing  Habitualization of purchasing behaviour in relation to the own behavior in relation to the own offer sales channel  Higher added value through the own branding concept

                 

Boss Brax Coca-Cola Eastpack Gucci Head & Shoulders iPhone Miele Montblanc Nivea Nutella Pampers Persil Rolex Swarovski Riedel Tempo Tommy Hilfiger

 Aldi: Alpenmark, Choceur, Fair & Gut, Karlskrone, Tandil  Anson´s, Peek & Cloppenburg: Christian Berg, McNeal, Abrams  C&A: Westbury  DM-Markt: Balea, Das gesunde Plus, alverde  Lidl: Bellarom, Freeway, Maribel, Milbona, Perlenbacher  Penny: Butcher´s, Naturgut

Possibly fluctuating quality – could be very high as well Lowest price Concentration on a distribution channel or on channels of a trading group Retailer  Ensuring the recognition of your own offer  Differentiation of the own offer in the environment of other retailers  Dominant communication of price advantage  Customer’s loyalty to its own sales channel  Habitualization of purchasing behaviour in relation to the own sales channel  Response of traditional retailers to offers of the discounter  Edeka: Gut & Günstig  Rewe: ja!

Fig. 1.10  Labelling of manufacturer’s brands, retail brands and no-name products

A decisive difference between these retail brands and the manufacturer’s brands lies in the distribution channel, i.e. in the sales outlets where the products are offered. Manufacturer’s brands generally aim for a high degree of availability – even across different forms of distribution. In contrast, the availability of retail brands is limited to the “issuing” retail channel – or to the companies belonging to a retail group. The Christian Berg brand is only available at Anson’s and Peek & Cloppenburg, which are affiliated under company law. The very successful all-in-one detergent Tandil is available either at Aldi, Aldi or Aldi. This creates a strong bond between satisfied customers and the Aldi sales channel. The third category consists of no-name products. These offers are also called generics, “whites”, unbranded articles, private brands, own brands or generic brands. This is an overarching naming convention for a larger part of the retailer’s assortment. Often only one product from different categories is included in this assortment. The assortment ranges from applesauce to potato chips, cat food, flour, milk, paper tissues and toilet paper to lemon tea and sugar.

1.1  Conceptual Basics of Marketing

27

The at first glance misleading designation “No-names” becomes comprehensible when you see that the individual product is just called “mild yoghurt” or “tender oat flakes” and not Landliebe or Köllnflocken. The name can also be “Caffé Crema” and not Dallmayr or Lavazza. Branding is therefore only given here across product groups. The no-name brands are also created by the retail companies. A promise of quality is only partially given for no-name products. The producers involved in each case may well change at some point. However, many of the no-name products are produced by the owners of the manufacturers’ brands themselves. The highlighted customer advantage is clearly the relatively low price. With regard to the design of the products, it can be seen that the retail companies have significantly increased the value of the packaging in recent years. cc

Memory Box  The no-name products are the answer of the established food

chains to the triumphal march of the discounters. That is why there are no no-­ name products on the shelves of the discounters themselves.

Retail companies try to achieve three central goals with retail brands and no-name products. First, they want to increase customer loyalty to their own sales channels. At the same time, the aim is to raise the profile of the retail companies among the competition. In addition, the aim is to improve earnings by taking over many of the brand management functions themselves. Even if the retailer are the “sender” of the product in the case of retail brands and no-­ name products, this does not mean that the retail companies themselves are the manufacturers of the products. Either they buy products from established manufacturers at low cost  – “undercover”  – in order to offer them at low prices under their own brand. Alternatively, the retailers involve third-party suppliers. Only in a few exceptions do the trading companies produce the products themselves. There are regular attempts to identify the brands behind the retail offers. Of course, the manufacturers of branded goods are not interested in this, as far as they are the producers themselves. The monthly tests of Stiftung Warentest make an important contribution to transparency with regard to relative product quality. In these comparative product tests, which are independent of manufacturers and suppliers, no-name products or retail brands also repeatedly achieve good or very good ratings. In some cases, they even perform better than the often much more expensive manufacturers´ brands. Consequently, the positioning of the different brand concepts in terms of quality varies greatly (cf. Fig. 1.11). cc

Food for Thought  If you want to know whether a no-name product or a retail brand

comes from the same company as the manufacturer brand, you only have to compare the veterinary control number on the products. The veterinary number is a mandatory declaration of the production site. It is used throughout the EU on all products of animal origin. If the no-name product, the retail brand and/or the manufacturer’s brand come from the same company, the products will usually also have the same veterinary number.

1  General Basics of Marketing

No-names

Retail brands

Manufacturers´ brands

Low

Relative quality

High

28

Low

Relative pricing

High

Fig. 1.11  Relative quality and price positioning of different brand concepts

The question arises why consumers do not just buy cheaper retail brands and no-name products when objective test results from competitive testing as Stiftung Warentest repeatedly prove their high quality. This is particularly the case with food, electrical appliances and cosmetics. The answer to this question is quite simple: We buy products not only because of their basic benefit. The purchase decision is often dominated by the additional benefit. cc

Memory Box  Benefit refers to the degree of need satisfaction that arises for

an individual, a group or an organizational unit from the use of a service, the purchase of a product or the use of a service. A distinction is made between basic and additional benefits. When a product is purchased, it is not only the basic benefit, i.e. the technical-functional contribution to performance, that is important.

The basic use of soap is the cleaning function, that of clothing a protective and warming function. The basic use of a watch is the ability to read the current time. The basic benefit of a car is to get from A to B as safely and securely as possible. In today’s world, almost all products provide these basic benefits. Consequently, their fulfillment is not sufficient for the successful positioning of offers in buyers’ markets. cc

Memory Box  More important than the basic benefit today is the so-called

additional benefit  – also called aesthetic benefit or prestige benefit. In today’s world, product selection is increasingly dominated by additional benefits.

In the eyes of many customers – and this is the only thing that matters – it makes a big difference whether a down jacket visibly displays the Abrams branding of Anson’s or that of Tommy Hilfiger, BOSS or Armani. For this difference, the customer is often prepared to

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29

pay a more or less high price premium, even if the basic benefit is identical. This difference is therefore referred to as the price premium. Reasons for the acceptance of such a price premium can be that a customer feels more comfortable in a higher positioned brand product and/or prefers to show off with it to friends. The buyer can identify with the brand and its philosophy. This is why there will always be customers who are willing to pay € 600 for a Montblanc 146 Meisterstück fountain pen, even though fountain pens of other brands or without a mark can sometimes be purchased for less than € 10. The use of the Montblanc writing instrument is associated with a completely different prestige or prestige in use than a fountain pen for € 5.95. For this, the customer is prepared to pay correspondingly more. A large number of companies and their employees benefit from this willingness. Premium and luxury brands such as Apple, Audi, BMW, Hermés, Louis Vuitton, Mercedes, Montblanc, Nespresso, Riedel, Rolex and Swarovski cultivate this additional benefit at the highest level! cc

Memory Box  The buyers of premium or luxury brands are happy about

products with “added value” – and the companies about higher contribution margins per product!

1.1.6 Categories of Purchase Decisions Before outlining different types of purchase decisions, it is first necessary to clarify which processes precede the act of purchase (cf. Fig.  1.12). The initial factor for a purchase process is a need. A need is a “state of tension with drive character” in the inner system of an individual. This need, be it hunger or thirst, “cries out” for satisfaction, so to speak. Therefore, the organism provides energy for “problem solving”. The need is initially still undirected and experiences a further concretization only as a requirement. A need is an “object-oriented intention to act”. Satisfaction is sought here through a very specific object. In the case of hunger, this can be Mars or Twix, a carrot, a banana or the Früchtetraum from Ehrmann. This need only becomes actionable as demand when the individual wants to purchase the corresponding product. Demand is defined in such a way that it must be based on purchasing power. This means that a potential customer who would like to purchase a Mars, but does not have the necessary money, is not exercising demand in this sense. The act of purchase is the consummated purchase. Not every demand leads to a purchase. Shops may be closed or the desired item may not be in stock (see Sect. 3.4 for more details). This process is not the same for all goods. Rather, the following types of purchase decision processes can be distinguished: • Extensive purchase decision process An extensive (extended) process is only carried out for purchases that belong to the shopping goods or the high-interest products. From the subjective perspective of the

1  General Basics of Marketing

Need

Hunger

Requirement

Mars, Twix

Demand

Level of concretization

Level of tension

30

Action

Act of purchase Fig. 1.12  From need to act of purchase

Stimulation phase

Search phase

Repurchase

Evaluation & decision phase

phase Purchase phase

Fig. 1.13  Phases of an extensive purchase decision process

customer, it is necessary to deal intensively with the alternative offers. Before a good becomes a specialty good, such an extensive search and evaluation process usually takes place. This begins with the stimulation phase, which can be triggered by advertising in a newspaper, a post on Facebook or Instagram, an online banner, a conversation with an acquaintance or by a need (see Fig. 1.13). In the course of the search phase, various paths are taken to get an overview of what is offered. This applies to the topic of holiday trips as much as to a training offer or the purchase of a smart TV. The search for information can take place online and/or offline. In the evaluation and selection phase, the alternatives are examined with regard to their suitability for satisfying the need and are continued via requirement and demand to the purchase phase if the necessary purchasing power is available. • A particularly important phase, which is still neglected in many business areas, follows the purchase act: the post-purchase phase. This is where many customers experience

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31

so-called post-decisional regret. This is a regret after the decision (cf. Kroeber-Riel & Gröppel-Klein, 2019, pp.  265–267). What is the basis for this? The customer has decided – possibly after a lengthy decision-making process – in favour of one ­alternative and thus against other, perhaps equivalent offers. Therefore, questions may now arise, such as: –– –– –– –– –– –– ––

Have I chosen the right offer? Have I considered all the essential criteria in the selection process? Wouldn’t it have been better if I had chosen the other offer? Wouldn’t there have been other alternatives available? Have I obtained all the relevant information in advance? Shouldn’t I have waited a little longer to decide? Etc.

• How should a company respond to expected post-purchase dissonance? cc

Memory Box  The customer is looking for purchase confirmation in this postpurchase phase – to get rid of the post-decisional regret.

• Such a purchase confirmation can be made by attaching a letter to the product with the tenor: “Congratulations on the purchase of this product! You are now one of over 100,000 customers who choose our company year after year …” The vendor’s special warranty terms can also be highlighted again. In the case of Land’s End, this is the lifetime warranty. Also the reference to a 24/7 available hotline support can contribute to the avoidance of these dissonances. A letter sent after conclusion of the contract, in which the positive test results of the Stiftung Warentest are pointed out, also helps the customer to reduce the dissonance. Such a procedure regularly takes place with Cosmos Direkt Versicherung. At the same time a possible follow-up purchase is prepared. After all, such information gives the customer the desired good feeling. • Habitual purchase decision process The habitual purchase decision process often comes into play with convenience goods and low-interest products. People usually decide once for products such as magazines, toothpaste, shampoo and detergent: these products are then often bought for several years or even decades without the product choice being questioned again. After this initial decision, the search, evaluation and selection process is no longer necessary or is at least greatly shortened. For companies, it is a dominant goal to establish their offerings in such habitual buying processes. This includes not only brand management that focuses on continuity in terms of positioning and product development. In addition, a large distribution in different trade channels is often aimed at so that the buyer does not have to search for a long time. An apt example of this is the Nivea cream developed in 1911, which, despite all fashion trends, continues to exude great appeal and dynamism after 100 years – and this far beyond the cream segment.

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• Impulsive purchase decision process In impulsive buying decisions, the consumer does not go through a planned process. Here, the buyer is stimulated to buy by the specific offer at the POS (point of sale) or POP (point of purchase). The business policy of the clothing store Zara is partly based on such impulse buying. Here, changing collections are presented again and again at intervals of two to 3 weeks, without any advertising. In total, this amounts to several thousand new articles per year. The customer has to decide relatively spontaneously, because the collection can be sold out next week. In addition to the aforementioned Tchibo concept, the weekly changing hard goods offers from Aldi, Penny, Lidl and Norma also build on this. Since the majority of households in Germany now have side tables, barbecue equipment, irons and Nordic walking sticks, such offers are increasingly reaching their limits. IKEA’s business model is also geared towards spontaneous shoppers. Anyone looking for a particular piece of furniture is expected to spontaneously purchase as many other decorative items as possible on their way through the store – and is therefore kept in the store as long as possible by the wayfinding system.

1.1.7 Purchasing Behaviour of Organizations In companies, it is also individuals who make decisions. These can relate to hiring new employees, installing ERP software (ERP stands for Enterprise Resource Planning), buying a printing press, purchasing office supplies or raw materials and vendor parts. Nevertheless, there are important differences between B2C and B2B buying behavior: • Higher degree of formalisation Generally, purchasing processes in larger organizations have a higher degree of formalization. In many cases, there are comprehensive purchasing guidelines that are documented in purchasing manuals. In some cases, board members, managing directors and employees of the purchasing departments commit themselves in their employment contracts to observe the guidelines applicable in the company. What is the reason for this regimentation of purchasing processes? The larger a company is, the more extensive the lot sizes for purchasing become, be it for paper clips, PCs, office furniture, vehicles or machines. With these increasing lot sizes, the desire of suppliers to acquire such orders grows – even if it is with unfair measures. That is the reason for written instructions, that from a certain amount (e.g. € 1000), three offers must be obtained. The most favorable company is then to be commissioned. In addition, specifications can be made as to the amount above which a national or Europe-­ wide invitation to tender is to be issued. This is intended to avoid “shenanigans” with suppliers. The fact that this is not always successful can be seen regularly in the press. Another argument for the stronger regulation of processes can be seen in the pooling of purchasing power. If each individual department or – in a larger group – each subsid-

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33

iary were to carry out the purchasing processes autonomously, it would often only be possible to “extract” significantly less favorable conditions from the suppliers. The pooling of demand in a separate purchasing department, makes it possible to achieve corresponding volume discounts and possibly even VIP support as a major customer. • Deviating decision criteria In addition to price, other criteria are often applied when companies make purchasing decisions. Investment security is one such criterion. This is understood to mean the certainty that products, for example furniture, machines or software, will still be available on the market in several years’ time. Being able to rely on maintenance services and the supply of spare parts even several years after the purchase is part of investment security. This is one reason why smaller and new companies often find it more difficult to obtain orders from large companies. They are often unsure whether the supplier will still be around in 2 years. This is why decisions for durable goods are often made in favour of larger and better-known suppliers, even if they do not have the best offer. Thus, during IBM’s heyday, a well-known saying was: “Nobody ever got fired for buying IBM”. Image aspects can also play a role in the selection of a service partner. Who, as a decision-maker, doesn’t like to adorn himself with the fact that one works with consultants from Boston Consulting Group or McKinsey & Company? This sounds much better than cooperating with “Mr. Nobody & Co.”. This is true even if the latter may be able to offer the significantly better service, possibly even at more attractive conditions. Here again, investment security plays a role: a manager can hardly be reproached for having chosen McKinsey. But who can still justify having chosen “Mr. Nobody & Co.” if a project fails? Cooperation considerations can also play a role in the choice of partner. In the pharmaceutical industry and in the automotive industry, there is intensive cooperation in many areas due to the level of development costs. Strategic competitors such as BMW and Mercedes have come together to cooperate on the topic of autonomous driving. • Higher rationality Some argue that a higher degree of rationality is achieved in the buying behaviour of companies. It is true that, among other things, the higher degree of formalization already described and the buying center described below are attempts to virtually force a higher degree of rationality. However, this is by no means a guarantee. The business press regularly reveals that decisions in companies are often based on personal reasons that tend to be aimed at image, prestige or power expansion, which can be far removed from rational behaviour patterns from the company’s point of view. • Externally determined, derived demand The demand of companies is externally determined or derived from the service portfolio that the company itself offers. If a company, such as DHL, FedEx, Hermes or UPS, offers logistics services, corresponding vehicles are required for this. If a company manufactures floor pans for motor vehicles, not only steel but also pressing, welding and cutting tools as well as protective clothing for the employees are required. In all

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these cases, the demand of the company is derived from the products manufactured or the services offered. • Higher degree of individualization – provision of accompanying services In organizational purchasing processes, services can be individualized to a greater extent if a printing press, for example, is developed specifically for a customer or adapted to the customer’s requirements. In addition to this, service contracts are concluded, when investment decisions are made, in order to be able to ensure maintenance services or rapid delivery of spare parts. In some cases, the supplier also offers financing services in order to be able to offer the purchasing company an attractive overall package. • Making decisions collectively Decisions in companies are often made collectively, i.e. by several people. In order to clarify this situation, the term “buying center” has become established (cf. Webster & Wind, 1972). This is a mental construct that expresses the multi-personal approach in the buying behavior of organizations. The buying center does not usually represent an organizational or processually defined unit. Rather, it is a concept of thought to identify and name the people involved to a greater or lesser extent in a decision-making process (see Fig. 1.14). This approach makes it clear that the purchaser or the purchasing department alone should not be placed at the center of sales activities. Other persons can also – more or less visibly – influence the purchase decision. In the first place, the gatekeeper should be mentioned, behind which the chief secretary or the assistant to the buyer can hide. This role holder, also known as the information regulator, determines to a large extent what information in the form of mailings, offers, etc., ends up on the superior’s desk. The gatekeeper also decides whether a sales employee is put through by telephone and whether the caller gets an appointment. Therefore, it is crucial from a sales perspective to “get in good with” this role holder.

Gatekeeper

Influencer

User

Purchaser

Decision maker

Fig. 1.14  Buying center of purchasing behavior in organizations

1.1  Conceptual Basics of Marketing

35

The role holder buyer represents the classic contact point for sales. Here, at least formally, the purchasing power is bundled. De facto, however, this can look quite different if influencers, whether external or internal consultants, the “grey eminence” of the company (e.g. the owner) or other opinion leaders pull the strings from the background and thus decisively determine how the decision is made. It is often difficult to identify the holders of this “de facto power”. However, the effort is often worthwhile because only then is it possible to involve them in the sales and thus persuasion process. How far the formal power of purchasing goes also depends on whether the final decision maker is located in the procurement department. This is the case if the head of procurement makes the final decision. However, this can also be made by the board of directors. Purchasing then only has the task of preparing such a decision. From the point of view of those affected, a frequently neglected role of the buying center is the user himself. It is not uncommon that the users are only “allowed” to mention their needs without being asked for more specific requirements. Which supplier the company decides on and which products or services are ultimately selected on the basis of which criteria is often not transparent for the user. In the case of major purchasing decisions, it is not only in the interest of the seller, but also of the buyer to involve the users. cc

Memory Box  The buying center mentally summarizes these different roles.

As mentioned above, one person can take over several roles. The buyer can also be the decision maker. However, one role can also be performed by several people. The “buyer” can hide a team of buyers, and an “influencer” can hide a consulting unit, which in turn consists of several people. The great relevance of the buying center concept comes from the clarification that the requirements of the individual roles for a supplier can be completely different. For example, the user is interested in the ease of maintenance and the noise level of a machine, the speed of access to spare parts and the comprehensibility of the manual. The buyer is more interested in the payment terms, possible rebates or other discounts. The influencer, as well as the ultimate decision maker, may have very special interests all their own. These can apply to gaining a particularly image-rich partner who creates interesting events for their most important customers. Likewise, people like to adorn themselves with “big names” that can be “thrown around” at inter-company meetings. At least when it comes to winning larger orders, it can be a great advantage for the bidding company to counter the buying center with a selling center. The counterpart to the buyer is the classic salesperson, who must also seek the favor of the gatekeeper. Reference customers can be presented to the user as contact persons. Or direct contact can be established with technicians of the company offering the service in order to be able to answer questions as competently as possible. For the decision-maker, it is often a good idea – in order to take the hierarchical level into account – to involve the management of the offering company in the selling center.

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In this way, business can be discussed in passing, possibly on the golf course or at a business lunch. In this way, an important basis of trust can be built up through the expressed appreciation. Depending on the orientation, the influencer should be supported by own sales consultants. cc

Memory Box  The acquisition success of larger projects can be sustainably increased if the buying center is taken into account as a thought model. The effort for this is of course higher and must be justified by the sales or the profit potential of the customer.

1.2 Marketing Environment 1.2.1 Identification of Markets The market  – whether as a procurement or sales market  – is of central importance for companies. But what is meant by market? The market is about: • • • • •

a (mental) summary of all business relationships between current or potential suppliers and customers for a specific good or range of goods at a specific date related to a specific area.

The market can be as concrete as the weekly market on the market square in Bonn or the Christmas market on the Gendarmenmarkt in Berlin, where suppliers and consumers meet at certain times for a limited range of goods. It can also be as abstract as the global labour market, which describes the migration of workers between countries and the different prices for labour services. A global perspective also underlies the global energy and capital markets. Between these two extreme positions are, the German car market or the tourism market in Austria. The last two examples can illustrate that this regional delimitation of markets is losing importance in an increasingly globalized world. On the German car market, all the relevant manufacturers in the world come together and compete fiercely. In terms of winter sports, the Austrian tourism industry’s offerings compete not only with St. Moritz and the cross-country skiing regions in Finland, but also with heliskiing in the Rocky Mountains  – and with a beach holiday in South Africa. Under certain circumstances, these offers also compete with the question of whether the holiday budget would not be better spent on a flat-screen TV. For every company it is important to delineate the relevant market for itself. This delimitation is not only to be interpreted spatially, but can also include certain target groups. Only when markets are precisely defined can other market-relevant terms be used

1.2  Marketing Environment

37

Sales volume of a company Market volume (realized/planned sales) Market potential (a market‘s total capacity for one certain good, measured in sales)

Fig. 1.15  Terms used to describe markets

in a meaningful way. Various terms are used to characterise markets, describing the size of markets and the share of individual companies in them (cf. Fig. 1.15). In some cases, sales figures (e.g. in €) or sales volumes (in units) are used for the determination. Market potential describes the potential absorption capacity of a market for a good and indicates the maximum possible sales volume or the maximum achievable sales (e.g. for smartphones in Germany). The sales potential describes – as a subset thereof – the maximum conceivable sales volume that a company believes it can achieve. When determining the market potential, analogies can be made with other countries in order to approximate the expected market size for Germany. The use of smart speakers (speakers with integrated digital assistants) in the USA can be used to draw conclusions about their future distribution in Europe and Germany. cc

Memory Box  The size of the market potential represents a forecast value and

is therefore subject to uncertainty.

The 1901 prediction by Gottlieb Daimler, inventor of the automobile, is legendary: “The world demand for motor vehicles will not exceed one million – if only for lack of available chauffeurs.” Nor has IBM founder Thomas J.  Watson’s 1943 prediction come true: “I think there’s a world market for maybe five computers.” Nor has the prediction of Bill Gates, founder of Microsoft, who predicted in 1981, “You will never need more than 640 kilobytes of memory” (Radecke, 2010, pp. 9–12). The market volume refers to the already realized turnover or sales for a corresponding good (e.g. turnover with tablet PCs in Germany in 2023) or to a forecast turnover/sales, e.g. for 1 year (turnover/sales in 2025). It becomes clear that the market volume is much more concrete than the market potential.

38

cc

1  General Basics of Marketing Memory Box  Turnover is the applause for a company.

The ratio of market volume to market potential indicates the market exploitation rate. This provides an indication of the level of market growth that can still be achieved in the future. The market utilisation rate for “white goods”, i.e. for refrigerators, washing machines and kitchen ovens, is almost 100% in Germany. Consequently, replacement demand dominates here – and growth of individual suppliers can only take place at the expense of competitors. This explains, among other things, the high price pressure on the German market. Market exploitation rate 

Market volume 100 Market potential

The absolute market share of a company indicates the share that a company has realised in a specific market. The calculation is based on sales volume (turnover) of a specific company (cf. Fig. 1.15). In order to determine the market share, it is again important to define the market that is relevant for a company. A Berlin entrepreneur who offers handmade soaps at the local Christmas market may have achieved a market share of 7% there with regard to such soaps. If the entreprenuer were to define his or her market in Berlin as “hand and industrially manufactured soaps”, the market share would fall to a small per mille value. If Germany rather than Berlin is defined as the relevant market, this supplier is no longer perceptible. Therefore, when assessing market shares, the decisive factor is how the relevant market and hence the corresponding market volume are defined. Market share 

Turnover of own company 100 Market volume

The relative market share results from the relation between the own market share and that of the largest competitor. The relevance of this parameter can be seen in the following example: If a company A has a market share of 20%, this may seem a good result at first glance. In fact, however, an evaluation of this market share is only possible in comparison to the competitors. If the largest competitor B has a market share of 40%, the relative market share of company A is only 0.5. If both companies have the same market share, the relative market share is 1. This value is obtained by dividing 20% by 20%. If the largest competitor B has a market share of only 5%, the relative market share of company A is 4. This value tells much more about the importance of the company in the market than the absolute market share. It should be noted that the relative market share has no unit of measurement. Relative market share =

Turnover of own company Turnover of the largest competitor

Depending on the number of suppliers and customers on a market, nine different market forms can be distinguished. These market forms exhibit different intensities of competition (cf. Fig. 1.16). The respective market form influences not only how companies use

1.2  Marketing Environment Demanders

39

Many (atomistic)

View (oligopolistic)

Many (atomistic)

Two-sided polypol

Demand oligopol (oligopson)

View (oligopolistic)

Supply oligopoly

Two-sided oligopoly

Limited demand monopoly

One (monopolistic)

Supply monopoly

Limited supply monopoly

Two-sided monopoly

Supplier

One (monopolistic)

Demand monopoly (monopson)

Fig. 1.16  Scheme of market forms

their marketing instruments, but also the extent to which competitors can be expected to react to the activities of competitors. A classic example of a supply monopoly is the market for search engines. Google has a market share of over 95% in Germany. The alternatives Bing, DuckDuckGo, Ecosia and Yahoo only lead a shadowy existence. Many millions of computer users in Germany entrust their data to Google every day – making the company more powerful! The aspiration of market-oriented governments is to overcome monopolies. The reason is very obvious: companies in a monopoly situation are often less innovative and less customer-oriented. Moreover, due to the lack of competition, they tend to be able to impose higher prices in the market. It is in this context that the liberalisation efforts at the European level, which aim to promote competition, should be seen. The German Act against Restraints of Competition (Cartel Act) aims to prevent the emergence and abuse of a dominant position by individual companies in favour of functioning competition (cf. Sect. 5.2.2). An example of a supply oligopoly is the market for large-volume passenger aircraft. The suppliers Airbus and Boeing are faced with demand from a large number of national and international airlines. These two companies clash with all the major demanders. The extent of political support by the governments of the supplier nations is often decisive for the purchasing decisions of national airlines. The mineral oil trade in Germany also represents a supply oligopoly. Here, the supplier chains Aral/BP, Shell, Jet, Esso, Avia and Total dominate the mineral oil market. In the case of petrol prices, it becomes particularly apparent that if one supplier changes prices, the others “have” to react quickly in order not to lose market share. In addition, it

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is repeatedly found that the price changes over the course of the day are very similar for all suppliers. The already cited purchasing concentration of the large retail chains leads to a supply oligopoly in the food trade in Germany. The top five companies together achieve a market share of 75.6% (cf. Müßigmann, 2020). Edeka dominates the market with a turnover of around € 61.9 billion and a market share of 24.5%. The second place is reached by Rewe with a turnover of € 44.7 billion (market share 17.7%). The Schwarz Group with Lidl and Kaufland is in third place with sales of € 41.7 billion (market share 16.5%). The Aldi Group (Aldi Süd and Aldi Nord) is in fourth place with sales of € 29.5 billion (market share 11.7%). Metro is in fifth place with sales of € 13.2 billion (market share 5.2%). There is also an oligopoly on the German electricity market. Here, the companies E.ON, RWE, Vattenfall and EnBW dominate the market. The global rating agency market is also dominated by just three large companies: Fitch, Standard & Poor’s and Moody’s. Here, too, there is an oligopoly. The book and magazine market is a two-sided polypole. A large number of publishers face many millions of book buyers. However, it must be taken into account that there is increasing concentration in the book trade itself and that Amazon is already behaving (almost) like a monopolist in price negotiations with publishers. A two-sided polypole also exists in the case of food, as a large number of suppliers meet millions of consumers (e.g. in the case of soft drinks or muesli). A demand oligopoly exists, with certain suppliers in the automotive supply industry. In many areas, suppliers are faced with only a manageable number of globally active automotive companies. A two-sided oligopoly exists for high-speed trains. The few countries that are currently active as demanders are opposed by offers from China (CRRC, today market leader), Germany (ICE), France (TGV) and Japan (Shinkansen). If one analyses the sales activities of the companies behind them, it becomes clear that marketing successes can often only be achieved with massive political support from their own governments. Frequently, deals are promoted by attractive financing programmes and partly secured by the supplier country. A (limited) demand monopoly often arises when the state becomes active as a buyer. This is the case with armament projects. A two-sided monopoly exists in collective bargaining, when the respective employers’ associations and the trade unions sit opposite each other. Due to the concentrations of power that become clear here, it is understandable why trade unions tend to be against and employers’ associations tend to be in favour of agreements at company level. Such agreements would reduce the power positions of the trade unions. In order to answer the question in which market form an undertaking operates, it is again helpful to define the relevant market. The craftsman who produces and sells hand-­ pulled candles in Pankow/Prenzlauer Berg is a supply monopolist not only in this part of Berlin, but even in the whole of Berlin. There is only one candle maker left here. If all

1.2  Marketing Environment

41

companies producing and/or selling candles in Berlin are defined as the relevant market, this is already a polypole – faced with a large number of potential customers. The question regarding the definition of the relevant market is also raised when it comes to whether a company holds a dominant position. If, in the media sector, TV, radio, newspaper and magazine advertising are regarded as products which can substitute each other, it becomes much less likely that a company holds a dominant position than if the newspaper market is regarded in isolation as the relevant advertising market and the market shares of the companies operating there are analysed. cc

Memory Box  The definition of the relevant market has implications for the

approval or prohibition of mergers and acquisitions.

1.2.2 Macro-Environment of the Company In Fig.  1.2, the relevant areas of the macro-environment of the company were named. These factors, which have a major impact on the company’s micro-environment, are analysed in more detail below.

1.2.2.1 Factors of the Political and Legal Environment The attractiveness of a country as a location or target market for a company is significantly shaped by this part of the macro-environment. Central factors are: • Economic policy orientation Regulations on co-determination and collective bargaining autonomy; promotion of business start-ups; market economy or planned economy • Protection of private property Legal protection of intellectual property such as patents, brand names, etc. • Legal certainty Position and independence of legal institutions; ability to enforce one’s rights; ensuring “fair” court proceedings • Laws Codification of regulations through tax laws, law against unfair competition, trademark law, law against restriction of competition, product liability, environmental protection laws etc. This list gives an impression of which aspects are assigned to this area. In Europe, membership of the EU (European Union) or the euro zone has a particularly lasting influence. The EU bodies in Brussels not only define many legal framework conditions, but also reduce trade barriers between EU members and create uniform framework conditions for companies in the EU.

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1.2.2.2 Social, Cultural and Environmental Factors This area is concerned, among other things, with the cultural values and norms on which a society is built. The prevailing religions, the families and the institutions responsible for education play a central, value-creating role, albeit with varying degrees of intensity. The importance attributed to different products, activities and organizations in society is also shaped by such values. These have an impact on the usability of genetic and nuclear technology as well as on the willingness to donate to social and ecological institutions. In addition, the following criteria should be analysed to describe societies in terms of status quo and expected changes: • • • •

Age structure of the population Average family size Educational level Level of employment

The shift in the age structure of the population visible in Fig.  1.17 is caused by the longer life span and the low birth rate in Germany (cf. Destatis, 2021a). In the future, there will be fewer and fewer young people compared to those of a higher age. This development represents a challenge not only for the social security systems, but also for those companies whose offerings have so far been geared more to the youth segment and which have so far offered only a few products for the growing senior citizens’ market. In addition, the communication and also personnel policies of companies must be geared more strongly to the requirements of the older target customers, because a shortage of labour is already foreseeable in Germany. The shift in the age structure in Germany is also accompanied by a change in the average household size (cf. Fig.  1.18; cf. Destatis, 2021b). While the number of one- and two-person households has risen since 1991, the number of three- and four-person households has fallen significantly. This development also has a direct influence on marketing. One-person households demand different packaging sizes. Working single households Age structure 2021

Men (in thousands)

Age structure 2040

Women (in thousands)

Men (in thousands)

Age structure 2060

Women (in thousands)

Men (in thousands)

Fig. 1.17  Age structure of the population in Germany – 2021, 2040 and 2060

Women (in thousands)

1.2  Marketing Environment

1 person

43

2 persons

3 persons

4 persons and more

Fig. 1.18  Private households by household size in Germany – in %

also expect different opening hours from stores in order to be able to shop after work. Alternatively, these people are turning to online providers – also for grocery shopping. Also the decline in the number of larger households is having an impact on the living space and furniture required. At the same time, the need for large china services and comprehensive cutlery sets is declining.

1.2.2.3 Factors of the Economic Environment The economic environment influences entrepreneurial activity in a special way. This is the relevant background for both production and marketing. The particularly important influencing factors include: • • • • • •

Economic growth of the country, measured in terms of gross national product Purchasing power and distribution of purchasing power in the population Household income (net and gross) Inflation rate (internal monetary stability) Exchange rate (external currency stability) Unemployment rate

Germany’s membership of the EU is of particular importance in this area. The introduction of the euro in 2002 has eliminated any exchange rate risk between the countries of the euro zone. At the same time, the countries of the euro zone are in a strong economic and thus also a comprehensive political dependency. For location decisions within Germany as well as in the individual cities, it is necessary to consider how purchasing power is distributed. Purchasing power maps  – e.g. from GfK, the largest German market research institute – provide important information on this (cf. GfK, 2021).

1.2.2.4 Factors of the Technological Environment This area includes, among other things, the hard and soft infrastructure that companies find for production and marketing. The so-called hard infrastructure includes:

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• Efficient transport systems (whether by road, rail, water or air) • Reliable and affordable energy and water supply • High-performance telephone and Internet connections (e.g. with 5G networks) Soft infrastructure includes the following areas: • Training institutions for the qualification of the population and thus also of potential employees and customers • Comprehensive and affordable health care • Legal systems that can be accessed to enforce the regulations adopted by the legislator Weaknesses in the area of infrastructure can only be partially overcome by the companies. In the case of industrial settlements, this is possible by building their own supply facilities and by locating training units. A look at the “big picture” shows that the areas of the macro-environment described are changing much more dynamically today than in the past. To describe the associated challenges, we speak of a VUCA world. The following contents are hidden behind this acronym (cf. Kreutzer, 2022): • Volatility Volatility describes the increasing frequency, the high speed and the extent of the (often unplanned) changes to which all market participants have to adjust again and again. This applies to the high fluctuations in stock indices (e.g. DAX and Dow Jones), but also to the prices of oil, gas and gold. Volatility also means elusiveness, because certain phenomena require a lot of attention in the short term, only to disappear again quickly. • Uncertainty Uncertainty makes it increasingly difficult to predict events and their effects in both private and professional life. Only a short time ago, “specialists” were predicting an end to the gold price boom. Things have turned out quite differently. • Complexity Complexity refers to the increasing number of links and interdependencies that make almost all areas of life and work more difficult to understand. The statement “everything goes” illustrates this phenomenon. At the same time, more and more is being connected. The Internet of Everything and cross-border value chains come to mind here. Another example is the almost unmanageable number of tools that are available to a marketing manager today. • Ambiguity Ambiguity describes the ambiguity of facts and circumstances, which makes a correct interpretation and decisions based on it increasingly difficult. This ambiguity is also the breeding ground for all kinds of conspiracy theories – as abstruse as they may look in a fact-based analysis. However, ambiguity here does not mean the euphemistically named “alternative facts”. For these are quite simply refutable lies!

1.2  Marketing Environment

cc

45

Memory Box  The term VUCA world describes today’s challenges for

companies.

1.2.3 Micro-Environment of the Company At the center of the company’s micro-environment (cf. Fig. 1.2) are the – current and/or potential  – customers. Determining their needs and expectations is the central task of market research (cf. Chap. 2). One of the questions that arises here is which type of customer the company’s marketing should focus on: • Consumers Consumers are end users of products and services. • Commercial customers Commercial customers are production or service companies. • Public buyers Public customers include state universities, museums and public authorities. In highly competitive markets, the customer-oriented perspective must be supplemented by a comprehensive examination of the relevant competitors. From the company perspective, it can be examined in the relevant market which other providers implement a comparable concept. This can be based on the following criteria (cf. on the strategic group, Chap. 2): • Similar quality standards Here we can think of the premium suppliers in the clothing segment (including Baldessarini, Lagerfeld, Armani, Bugatti and Strellson) • Comparable pricing and offer concept Examples exist within the airlines in the low-cost segment (Eurowings, Ryanair, easyJet) or with the food discounters (Aldi, Lidl, Netto, Norma, Penny). • Common core market In the case of car manufacturers this can be the volume market (including Volkswagen, Toyota, Hyundai, Ford, Opel). In addition, suppliers must be taken into account in the analysis of the micro-environment. With regard to the workforce, these include above all schools and universities as well as other training institutions. However, competitor companies are also important as “suppliers” if employees are to be poached from them. Other important partners are the suppliers whose products and services are to be integrated into the own value chain (e.g. raw materials, components, technologies, patents). Finally, capital providers should be considered as part of the micro-environment analysis. These can be banks, which provide companies with loans. But they also include shareholders who acquire shares in the company and thereby also provide funds.

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In order to cover all the fields addressed in the context of the micro- and macro-­ environment, market research has been further developed into marketing research (cf. Chap. 2).

1.3 Behavioural Factors Influencing Marketing In order to understand the behavior of people, an orientation to the so-called S-O-R model helps. The letters stand for the following contents: • S: Stimulus • O: Organism (inner life of the human being) • R: Reaction or response This model is based on the assumption that external stimuli in the person’s inner life trigger certain processes that can then lead to a reaction (cf. Fig. 1.19). Such stimuli can come from the person’s general environment. Marketing stimuli can be posters or online banners, coupons or advertisements. The secondary placement of a product in a store or a TV commercial also belong to these stimuli. These stimuli are processed in the inner life of a person. The processes that take place here represent a black box. After all, it is not possible to simply record how the stimuli are processed in the inner life. A distinction is made here between different processes. Cognitive processes support perception as well as thinking, decision-making and learning. Here it is a matter of gaining knowledge. Activating processes supply the human organism with energy for action. Emotions, motives and attitudes play a central role here (cf. Kroeber-Riel & Gröppel-Klein, 2019).

S: Stimulus

O: Organism

Text R: Response

Directly observable stimuli

Processes not directly observable

Directly observable processes

•

Stimulus from the general environment

•

Activating processes

•

•

Specific marketing stimuli

•

Cognitive processes

• •

•

Conative processes

• •

Black box Fig. 1.19  Schematic of the S-O-R model – stimulus, organism, response

Process of information gathering Brand selection Choice of shopping centers Price acceptance Quantity purchased

1.3  Behavioural Factors Influencing Marketing

47

In addition, conative processes also take place in the black box. These include a decision-­related intention to perform an action on one’s own initiative. This can lead to an action that is visible as a response in Fig. 1.19 (cf. Bruhn et al., 2019, p. 566 f.). In the following, the sociological and psychological influencing factors that become effective here are analysed in more detail.

1.3.1 Sociological Factors Influencing Purchasing Behaviour Decision-making and purchasing behaviour is initially influenced by the environment and the society into which people were born and in which they grew up and live. Values and norms play a role in these sociological (social) influencing factors. These are transmitted through religion and/or upbringing as part of the respective culture and internalized by people (see Fig. 1.20; Kroeber-Riel & Gröppel-Klein, 2019; Foscht et al., 2017; Solomon et al., 2019; Raab et al., 2016). These include legal prohibitions, for example the prohibition of alcohol in Arab countries. Customs, traditions and habits also shape behaviour. These are reflected in eating and dress habits (e.g. with and without headscarf, niqab, etc.). In addition, there are often subcultures and different social classes and milieus, whose values can differ significantly from the general trends of the culture. Such milieus are used in conjunction with specific value patterns by the Sinus Institute (2021), in order to classify the entire population of Germany. The aim of the Sinus Milieus is to convey as true a picture as possible of the socio-cultural diversity in societies. For this purpose, the sensitivities and orientations of people as well as their values, life goals, lifestyles and attitudes are described. At the same time, the social backgrounds are also illuminated. Sociological influences

Psychological influences

Opinion leaders

Culture

Opinion followers

Activation

Purchase decision

Motives

Perception

Text - extensive

Moods

Peer pressure

Thinking

- habitual

Emotions

Learning

- impulsive

Attitudes

Conformity pressure

Individual values and norms Values and norms of the society/reference group

Fig. 1.20  Factors influencing consumer buying behaviour

Sub-culture Social class Social environment

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The Sinus Milieus group people into “groups of like-minded people”. The dimensions of social situation and normative basic orientation are used for this purpose. The following classes are distinguished in the basic orientation: • Tradition (holding on, preserving) • Modernisation/individualisation (having & enjoying, being & changing) • Reorientation (doing & experiencing as well as overcoming limits) In connection with the social situation, which is significantly influenced by age, education, occupation and income, different segments become visible. These clearly differentiate themselves with regard to their information and purchasing behaviour. The following stratifications are made here: • Lower class/lower middle class • Middle middle class • Upper middle class/upper class In detail, the various Sinus-Milieus are concretised as follows (cf. Sinus Institute, 2021): • Conservative-established (10%) This segment comprises the classic establishment  – characterized by an ethic of responsibility and success, claims to exclusivity and leadership, a sense of status and an increasing desire for order and balance. • Liberal-intellectuals (7%) This is the enlightened educated elite with a critical world view, a liberal basic attitude and post-material roots. The desire for self-determination and self-development dominates here. • Performer (8%) This multi-optional, efficiency-oriented performance elite is characterized by global economic thinking and a self-image as a consumer and style avant-garde. There is a high affinity for technology and IT. At the same time, there is a tendency towards establishment, which is accompanied by an erosion of the visionary elan. • Expeditive (9%) The ambitious creative avant-garde comprises transnational trendsetters who are mentally, culturally and geographically mobile. They are networked online and offline, non-conformist and always on the lookout for new frontiers and new solutions. • Adaptive-pragmatic (11%) The modern young middle shows a pronounced life pragmatism and utilitarian thinking. The people positioned here are willing to perform and adapt, but also have a desire for fun and entertainment. They are determined, flexible, cosmopolitan  – but at the same time show a strong need for anchoring and belonging. • Socio-ecological (7%) This committed socially critical milieu is characterized by normative ideas of the “right” life. The ecological and social conscience is strongly pronounced. This is where

1.3  Behavioural Factors Influencing Marketing

•

•

•

•

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49

the globalisation sceptics can be found, as well as the champions of non-discriminatory conditions and diversity. Civic center (13%) This segment comprises the bourgeois mainstream that is willing to perform and adapt. The social order is generally affirmed. Here, the desire for professional and social establishment, for secure and harmonious conditions prevails – accompanied by growing excessive demands and fears of decline. Traditional (11%) Here we find the older generation that loves security and order. They are entrenched in the petty bourgeois world or in traditional working-class culture. Frugality and adaptation to necessities as well as increasing resignation and a feeling of being left behind characterize this segment. Precarious (9%) This is where the lower class can be found, striving for orientation and participation (“belonging”). There is a desire to keep up with the consumption standards of the broad middle class. However, social disadvantages accumulate here – accompanied by experiences of exclusion, bitterness and resentment. Hedonists (15%) This fun and experience-oriented modern underclass or lower middle focuses on a life in the here and now, carefree and spontaneous. Members of this milieu often behave in an adapted manner at work – and break out of the constraints of everyday life in their leisure time. Food for Thought  Check which milieu you would place yourself in. Where would you find your parents in this diagram? In which milieus would your superiors position themselves? Where would you find former classmates, work or study ­colleagues?

Think about which parties are most likely to be voted for in which of these milieus. Which media are increasingly used in which milieus  – both online and offline? The Sinus Milieus, which are based on the lifeworlds and lifestyles of consumers, are anchored in a comprehensive information system that can be used for target group optimization. This applies to all areas of marketing, especially to product development and brand positioning, as well as to communication and media planning. The groups to which a person belongs or aspires to belong also have an important influence on individual purchasing behaviour. We talk about reference groups or peer groups. This refers to groups of similar characteristics in terms of age, field of study, hobbies, etc. These people have an influence on the decisions of the individual. For a student, such reference groups can be the other students, colleagues on an internship, acquaintances from the fitness or football club or generally the circle of friends. Such groups of like-­ minded individuals can also be found in social networks. They exert a significant influence

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on one’s own decision-making and purchasing behavior. It is problematic when such groups form around conspiracy theories and detach themselves from the general truth (cf. Kreutzer, 2020). Opinion leaders or influencers play a particularly important role in the exchange of information about music, fashion, literature, the hottest bars and other leisure activities. Opinion leaders are particularly interested in a subject area and usually deal with the corresponding offers much more intensively than other people. This is demonstrated by subscriptions to relevant magazines and newsletters as well as by a high level of engagement in social media. This can be seen on Facebook and Twitter, but also through participation in blogs and online communities (see Kreutzer, 2021b, pp.  406–550; Kilian & Kreutzer, 2022). Opinion leadership can relate to literature, music, fashion, investments, wearables, smartphones, holiday destinations or parties, among other things. Such people are often asked for advice by others (the opinion followers) and thus directly influence their decision-­making behaviour. cc

Memory Box  The great importance of opinion leaders or influencers – espe-

cially in social media – has led to the triumph of so-called influencer marketing.

1.3.2 Psychological Factors Influencing Purchasing Behaviour 1.3.2.1 Activation and Information Overload With regard to the psychological influencing factors, i.e. the aspects lying within the individual himself, a distinction must first be made between activation and perception. A central prerequisite for a perception process is the activation of the target person. Without their activation, no successful perception and information processing can take place. Only through activation is the organism supplied with energy. That is why many marketing instruments – mainly advertising – try to ensure activation with the aim of providing energy. The importance of activation can be seen in Fig.  1.21. There, the ­relationship between the extent of activation and the performance of the organism is shown. The so-called lambda hypothesis postulates that as the strength of activation increases, an individual’s performance initially rises but then falls again after a certain level of activation (cf. Kroeber-Riel & Gröppel-Klein, 2019, p. 92). Activation can be measured in different ways. On the subjective level, the extent of activation can be determined by verbal statements made by the subject. However, it must be taken into account that the person may not be telling the truth when questioned, because arousal through erotic stimuli or depictions of violence, may conflict with their value system. This type of response behaviour is referred to as the phenomenon of social desirability. This phenomenon means that an interviewee tends to answer questions in a way that the person believes corresponds to social norms and expectations (see also Sect. 2.2).

1.3  Behavioural Factors Influencing Marketing

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Performance

Sleep

Relaxed alertness

Awakened attention

Heavy arousal

Panic

Activation

Fig. 1.21  Relationship between activation and performance

On the motor level, the activation level can be determined by the directly observable behaviour. This refers to facial expressions, gestures and posture. However, such changes in facial expressions, gestures and posture are hardly ever detected when it comes to advertising promotions. On a physiological-biological level, activation can be determined by the following measurement methods: • Brain waves (electroencephalogram, EEG) • Brain activity These activities are recorded by positron emission tomography (PET) or functional magnetic resonance imaging (fMRI). This makes the active brain regions visible (see Sect. 1.3.2.2 for more details on neuro-marketing). • Skin resistance (EDR: electrodermal reaction or PGR: psycholgalvanic reaction) The so-called psychogalvanic reaction makes use of the phenomenon that a body secretes more sweat with increasing activation. This increases the conductivity of electricity on the skin. These changes can be detected and are also used in lie detection. • Pupil size The pupil initially dilates when great attention is required. At a critical limit, it narrows again, indicating excessive demands. • Voice frequency In many people, the voice becomes “higher” with increasing excitement. Such changes can be determined. cc

Memory Box  Activation is a necessary but not a sufficient condition for achiev-

ing an effect (e.g. through advertising).

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Without achieving a minimum activation, there is a great danger that advertising messages will not be perceived and processed. Therefore, companies try to achieve activation through a variety of stimuli. Activation via internal stimuli is solely in the hands of the individual, be it via alcohol, caffeine, teein or nicotine. Companies therefore try to ensure activation through external stimuli. In the case of external stimuli, the following types are to be distinguished: • Emotional stimuli These stimuli include the use of the child scheme (cf. Kroeber-Riel & Gröppel-Klein, 2019, p. 20 f.). Behind this is the insight that small birds, dogs, chubby children’s faces, a big head and googly eyes trigger automatic reactions such as sympathy and care behaviour in the viewer. Companies take advantage of this mechanism when using these stimuli in advertising. In addition, erotic stimuli fall into this category, as they have the strongest activation effects compared to other key stimuli. However, care must be taken when using them that they do not distract from the actual intention of the advertising and do not trigger any reactance or irritation. Figure 1.22 shows the use of erotic stimuli. • Cognitive stimuli Here we work with mental conflicts, with contradictions and surprises. In this way, the viewer is encouraged to engage with the advertising message. An example of what Fig. 1.22  Book cover with erotic stimuli. (Source: © Springer Fachmedien Wiesbaden GmbH)

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I consider to be a particularly successful use of cognitive stimuli is the sentence used in the advertisement for Geo magazine: “The great secret of our progress: mistakes.” • Physical stimuli Activation of the target person can also be achieved by a special size or colour of the advertising medium (in this case an advertisement, a brochure or a poster). An unusual volume or signal tones (such as the ringing of the telephone or the siren of a police car) can also stimulate the attention of the target person. In online marketing, animated advertising banners or self-starting videos are used to force attention. So-called 3-D mailings are also used for advertising letters, where the recipient feels that there is not just a letter in a mailing envelope, but something else as well. This is exactly what is supposed to arouse curiosity and encourage the recipient to open the letter. The same can also succeed if the address is handwritten (cf. Kreutzer, 2021a, pp. 197 f., 286–290). Activation is also particularly important because today’s target persons are drowning in a flood of information and suffer from information overload. Of all the information that impacts on customers – be it via TV, radio, posters, newspapers, magazines, telephone, mailings, apps, social media (blogs, social networks), banners, etc.  – only a fraction is perceived today. cc

Memory Box  Today, a person perceives significantly less than 1% of the information available in their field of vision.

All other messages already miss the first communicative goal, at least to be perceived (cf. Fig. 1.23). The reason for this is that all people have built up a filter to protect them-

- 1 (inelastic area)

90 80 70 60

PE = - 1

50 40

PE = < - 1 (elastic area)

Price-sales function

30

Maximum price

20 10 0

1

2

3

4

5

Price

Fig. 5.29  Ideal typical price-sales function

day at the end of the summer holidays as well as Black Friday, Singles’ Day and Cyber Monday. There are no limits to the creativity of creating occasions for price reductions. As a result, there are hardly any times without significant price reductions. There is always a sale somewhere! How strongly do changes in the price affect the quantity sold and, above all, also the turnover? The expected effects can be determined by the price elasticity. The price elasticity for consumer goods is −2.5 on average. The minus sign shows that the changes in price and quantity are opposite. It follows that a price increase leads to a reduction in the quantity demanded and vice versa. The figure “2.5” expresses the fact that, on average, a price change of 1% leads to a 2.5% change in quantity. These lasting effects underline the need to be very careful when defining pricing strategies, because price is “a very sharp instrument”. What does the price elasticity of demand tell us? It provides information on the amount of relative change in sales volume due to a relative change in the price of a particular product. As already mentioned, the price elasticity is usually negative. This means that a price increase leads to a decrease in the quantity demanded. A price decrease leads to an increase in demand. Price elasticity is derived from the price-sales function. This represents the quantity demanded as a function of the supply price (cf. Fig. 5.29). In this ideal-typical representation in Fig. 5.29, the starting and end points are defined by the maximum price and the saturation quantity. The maximum price (also called the prohibitive price) indicates the price at which there is no more demand. At this point, no one wants to buy the product anymore. The saturation quantity expresses the maximum quantity demanded when the supply is free. The maximum price and the saturation quantities can be determined by price tests.

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Price elasticity (PE) takes on different values along this price-sales function in Fig. 5.29. The price elasticity is determined as follows: x M Quantity change xM Outgoing quantity Price elasticity   P Price change P Initial price



If the value of the price elasticity is “< −1” or “| PE | > 1”, we speak of the elastic range or elastic demand. cc

Memory Box  It is not the price that is elastic, but the demand!

In the area of elastic demand, price increases lead to a decline in volume and sales. Price reductions lead to an increase in volume and sales. If the price elasticity takes the value “> −1” or “| PE | < 1”, we speak of the inelastic range. In this case, inelastic demand prevails. In the inelastic range of the price-sales function, price increases also lead to a decrease in the quantity demanded, but nevertheless to an increase in sales. Price reductions also lead to an increased quantity demanded, but accompanied by a decrease in sales. With a price elasticity of “–1”, sales remain constant when prices change. The slope of the price-sales function itself corresponds to marginal sales. This denotes the absolute change in quantity when the price changes by one unit. The different effects of a price change along the price-sales function can be explained on the basis of the price- or quantity-induced sales effects triggered by it. In Fig. 5.30, a Quantity

PE = < - 1 (elastic area) Decrease of price, increase of sales

10 9

Sales effect, triggered by volume > sales effect, triggered by price

8 7 6 5 4 3

Sales effect, triggered by volume

2

Sales effect, triggered by price

1 0

1

2

3

Fig. 5.30  Price change in the elastic range of the price-sales function

4

Price 5

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price reduction of € 1 leads to a price-induced loss of sales of € 20. Twenty pieces, which were previously sold at a price of € 4, are now sold at a price of € 3 each. This effect is referred to as the price-induced sales effect in Fig. 5.30. The price-induced loss of sales is offset by a volume-induced sales effect. The price reduction of € 1 leads to an increase in demand. In this example, a total of 20 units are additionally demanded at a price of € 3. Consequently, the quantity-induced increase in sales amounts to € 60. In total, sales increase by € 40 with a price reduction of € 1. This value is obtained by adding the price-induced sales effect (here −€ 20) and the quantity-induced sales effect (here +€ 60). On the basis of these values, however, it is not yet possible to determine whether profit increases in addition to sales. To determine the profit, the costs of the products sold must be taken into account. The price elasticity is determined as follows: x M Quantity change 20 xM Outgoing quantity 20   4 Price elasticity   1 P Price change 4 P Initial price



The price elasticity of “–4” is therefore in the elastic range of the price-sales function. Figure 5.31 shows which effects are achieved with a price reduction of the same size in another area of the price-sales function. Due to the price reduction, there is a price-induced sales effect – more precisely a sales loss – of –€ 60. Finally, 60 pieces are sold for € 1 less. This is offset by a quantity-induced sales effect of 20 units. This means that only 20 addi-

Quantity

PE = > - 1 (inelastic area) Decrease of price, decrease of sales

10 9 8 7 6

Sales effect, triggered by volume < sales effect, triggered by price

Sales effect, triggered by volume

5 4

Sales effect, triggered by price

3 2 1 0

1

2

3

Fig. 5.31  Price change in the inelastic range of the price-sales function

4

Price

5

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tional units can be sold due to the price reduction. This results in a volume-induced sales effect – specifically an increase in sales – of € 20. The total effect in Fig. 5.31 adds up to –€ 40. Consequently, the price reduction at this point of the price-sales function leads to a decline in sales. This value is obtained by adding the price-induced sales effect (here –€ 60) and the quantity-induced sales effect (here +€ 20). In this case, the price elasticity is determined as follows:



x M Quantity change 20 xM Outgoing quantity 60   0.67 Price elasticity   1 P Price change 2 P Initial price

This value is “> −1” and thus lies in the inelastic range of the price-sales function. In the case of inelastic demand, a price reduction also leads to an increase in demand, but overall to a decline in sales. In any case, this is also associated with a drop in profits. A price increase in the inelastic range also leads to a reduction in demand, but also to an increase in sales and even to an increase in profits per product sold. The level of price elasticity in different markets is determined by estimates, expert and customer surveys or by price experiments (cf. Simon, 2015, pp.  67–72; Simon & Fassnacht, 2016, pp. 106–112). Corresponding investigations can also be carried out ex-­ post, i.e. after price changes. The following factors influencing price elasticity must be taken into account: • Presence of substitutes The more supply alternatives there are from the potential buyer’s point of view, the more elastic the demand will be. On the one hand, this involves the subjective awareness of alternatives and, on the other, a comparable quality rating. After all, a change should not be accompanied by a loss of quality. If these requirements are met, the buyer can easily switch to another offer in the event of a price increase. • One measure of this substitution relationship is cross-price elasticity. In this case, the relative change in quantity of product A is compared with a relative change in price of product B. x Offer A

Quantity changeOffer A

x Offer A Outgoing quantity Offer A Cross - price elasticity   POffer B Price change Offer B POffer B Initial price Offer B In the case of substitutive products, i.e. offers that can replace each other, the cross-price elasticity is positive. Here, customers simply switch to product A when the price of product B increases. This leads to an increased demand for A. Thus, the demand for margarine will increase if the price of butter increases.

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In contrast, the cross-price elasticity is negative for complementary products. Rising gasoline prices, for example, lead to lower demand for vehicles with high fuel consumption – and vice versa. In this case, the developments are in opposite directions, resulting in the negative value of the cross-price elasticity. • Relative level of expenditure Customers react less price-sensitive, the lower the expenditure for a certain offer in relation to the disposable income. What does a € 0.30 increase in the price of the daily newspaper mean if the household’s net monthly income is € 5000? Also, if the expenditure on a particular product is small compared to the total expenditure on an investment, customers are less sensitive to price. How significant is the € 1500 more expensive Miele stove in a total kitchen investment of € 30,000? • Limited transparency regarding price changes The more difficult it is for a buyer to recognize price changes, the less a customer will react to price changes. This may be the case, if they relate to follow-up costs or are “hidden” in the terms of purchase. Sometimes companies also try to conceal price changes by reducing the quantity at the same price (e.g. only 9 instead of 10 paper handkerchiefs in one package). • Characteristics of price consciousness The more buyers are sensitized to the topic of price, the more sensitively they react to price changes. For many years, advertising campaigns in Germany with the slogans “Geiz ist geil” (“Stinginess is cool”) or “Wir hassen teuer” (“We hate expensive”) by Saturn and “Ich bin doch nicht blöd” (“I’m not stupid”) by Media Markt ensured widespread sensitization to the topic of price. In many market fields, there was a veritable discountitis: “discounts for everyone and everything at all times”. This has significantly increased price awareness in general. Customers in many sectors react correspondingly sensitively to price changes. The fact that price comparisons have almost taken on the character of a popular sport can be seen in the number of bargain guides and the large number of price comparison service providers on the Internet. These can be found online at www.billiger.de, www. preisvergleich.de or even www.geizkragen.de. This pronounced price consciousness has also led to the fact that – supported by providers such as eBay and Amazon – additional competition has arisen between new and second-hand products. • Degree of habitualization of purchase processes The more buying processes are habitualized, the less price changes affect buying behavior. For customers to deviate from their habitual behavior patterns, larger price jumps are usually required. For this reason, attempts are made to bind customers permanently to certain service providers, manufacturers or retailers by means of customer loyalty programmes. The frequent flyer programme Lufthansa Miles & More as well as the customer cards and customer apps of H&M, MediaMarkt and Douglas come to mind. At the same time, the customer can be “immunized” – at least partially – against price increases (for more information on customer loyalty programmes, see Kreutzer, 2021a, pp. 267–350).

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• Relevance of the price in relation to the supplier/offer image The lower the importance of price compared to a superior image, the less importance is attached to price changes. Here we can think of price changes in Porsche cars, clothes from Dior or suitcases from Louis Vuitton. Whether the “Perfect Pencil Anniversary Edition 260 Years Faber-Castell” made of titanium mentioned in Sect. 4.2.2 costs € 490 or € 520 is of little importance to the buyer. Even someone interested in the Lange 1 perpetual calendar watch in red gold for € 98,000 would certainly not be deterred from buying it even at a price of € 105,000. The decision for such products is primarily determined by the strong brand and only secondarily by the price. The snob effect already mentioned can also have an effect here. A higher price makes the product even more attractive to a certain target group (cf. Sect. 5.2.1 on the Veblen and snob effect). • Interpretation of the price increase Customers may also see price increases as an indication of quality improvements – and accept them. Price increases can also simply be interpreted as reasonable in the case of generally rising prices. In both cases, buyers are less price-sensitive. The criteria shown can be used in forecasting or interpreting demand effects due to price changes. It is also important to consider another aspect directly related to pricing: the use of price as a quality indicator. The price is used as a quality indicator if a customer has no previous experience or quality information regarding an offer and such information is not available (e.g. in the form of a test verdict from Stiftung Warentest). The product itself can evade quality control in the trade in the case of packaged shirts or wine. If a “good drop” is to be bought for friends, the non-wine connoisseur will rather rarely reach for the wine offer for € 1.99, but rather for the one for € 14.99 – in the expectation of acquiring a clearly better quality. The wine connoisseur himself has other criteria and will choose the Gaja Barolo Sperss of a certain vintage because it promises him the highest drinking pleasure. It should be noted that even professional wine testers can be seduced into significantly better ratings by the label of a renowned winery (motto: “You drink with the label”) or a high price (motto: “Nothing is as tasty as the price”). This was determined in the course of blind tastings by a study (cf. Evers, 2009, p. 133).

Food for Thought  For which offers do you personally rely on price as a quality indicator?

In addition to this quality aspect, the price level also affects the perceived costs of a purchase decision (cf. Fig. 5.32). A high price can therefore not only increase the perception of quality. A high price also increases the perceived financial commitment of the buyer. The trade-off between the two outcomes leads to the perceived net benefit. Its level

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Perceived product quality

+

+ Perceived net benefit

Perceived price

+

+

Purchase probability

-

Perceived financial commitment

Fig. 5.32  Effects of price on purchase probability

has a direct impact on the likelihood of purchase. A high perceived quality has a positive effect on the perceived net benefit, whereas a high perceived financial commitment on the part of the buyer has a negative effect. The decisive factor in each case is the subjective perception of the buyer – which can be far removed from an “objective” evaluation. The multitude of factors mentioned here underlines the complexity of demand-oriented pricing. Once the “optimal” price has been determined  – e.g. in the run-up to product development  – this can be defined as the target value for further development. In this procedure, called target costing or target pricing, the company’s cost targets are derived from the prices that can be achieved on the market. This is why we can also speak of a target cost method. Based on the target market price, requirements can be defined for the company’s own product development, the production area and suppliers in order to ensure that the target costs and thus also the target price are achieved. At the same time, such a procedure is helpful against the risk of over-engineering as an expression of the “product infatuation” of technicians who would like to integrate all conceivable innovations into a product, regardless of whether the associated additional price can also be realized on the market.

5.2.2.3 Competitive Pricing The market stimulation strategy offers companies various options for competitive pricing (cf. Fig. 4.7). These basic strategies can be implemented in different pricing concepts (cf. Fig. 5.33): • Mid price strategy In the case of the mid price strategy, the company orients itself to the average market prices customary in the industry and thus to the prevailing price level. If necessary, a corresponding orientation towards the respective market leader can take place. This behavior is also referred to as price following. • Pricing above or below the average price

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Price 10 9

High price strategy

8 7 6 5

Pricing above the average price Mid price strategy

4 3

Pricing below the average price

2 Low price strategy

1

Time

0 Fig. 5.33  Competitive pricing – longer-term orientation

In the case the company strives to move out of the average range. The own offer is either positioned at a higher price in order to create higher quality expectations. Or the company’s offers are positioned below the market price customary in the industry because there are no other product advantages to motivate customers to buy. • High or low price strategy With a high or low price strategy, the company operates with its prices outside the average. With the high price strategy, a company sets itself extremely high in terms of price in order to position itself as a quality leader or as a provider with a particularly strong image and prestige. These include the energy drink Red Bull, the espresso ­supplier Illy, the shoe manufacturer Tod’s, the luxury supplier Louis Vuitton and the mineral water Bling, where the 0.75-liter bottle, studded with Swarovski stones, is offered in the price range of € 75 to € 98 in good restaurants. The low price strategy aims for the lowest price in the market. Examples of this are the food discounters Aldi and Lidl and, in the textile sector, suppliers such as KiK, Primark and Takko. Suppliers such as Action, Mäc-Geiz, Rusta and TEDi also use a low-price strategy for their offers. cc

Memory Box  Companies can operate very profitably in the market with a wide variety of pricing strategies. The prerequisite for a convincing success is that the respective pricing strategy harmonizes with the other marketing instruments as well as the overall strategy of the company. Aldi, IKEA, Primark and Ryanair are among the very successful companies at the lower end of the price scale. Suppliers such as Apple, Hermès, Miele and Porsche at the upper end of the price scale have also been achieving the highest profits for years.

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5.2.3 Static Pricing Strategies In static pricing strategies, prices are set for the longer term – based on costs, demand, competitors and the company’s objectives. The “static” element is expressed by the fact that the price is intended to exist for a longer period of time. Nevertheless, the defined price can vary according to different criteria, like quantity or due to the person of the buyer. However, the price changes that occur here usually refer to the same point in time. In comparison, dynamic pricing strategies take into account future market developments from the outset in order to determine a price sequence for a longer period of time in advance.

5.2.3.1 Static Pricing and Conditions Instruments For each pricing strategy, various additional forms of condition design can be used. A distinction must be made between the following versions: • Discount Discount is a price reduction on goods and/or services given on a list price. The recipients of discounts can be the end customers. Here one speaks of the consumer discount or the end customer discount. Distributors are remunerated by means of functional discounts for assuming certain tasks (“functions”). These are also referred to as dealer discounts. Dealer discounts can be linked to the listing of a product, i.e. to its inclusion in the retail partner’s assortment. This is also referred to as a listing fee. Dealer discounts can also motivate retailers to intensify their sales efforts and create market entry barriers for competitors. Volume discounts represent an instrument of the supplier to achieve certain purchase volumes. Corresponding discounts can also be granted for a certain order mix, to boost sales of new products, for example. With time discounts, the supplier has an instrument in hand to influence sales in terms of time. Loyalty discounts are intended to increase the loyalty of customers and/or sales partners (cf. Fig. 5.34). • Discount for cash payment Discounts for cash payment are price reduction, if payment of an invoice is made within a certain period of time. Since the seller has to bear lower financing costs in this case, these cost advantages are passed on to the customer on a pro rata basis. In some cases, this is also referred to as a cash discount. In sum, rebates and discounts are intended to either reward certain services provided by partners or to motivate contractual partners to behave in a certain way. This can be an increase in sales, the extension of the customer relationship or the simplification of processing through larger order volumes. In addition, the use of discounts makes it possible to reduce prices over time without changing the general price position.

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Functional discount (for trade)

Volume discount

 Wholesale discount

 Advertising allowance

 Discount according to turnover (according to order volume)

 Second placement

 Discount depending

 Retail discount

discount

 Special promotion discount  Discount for taking over a financing function

on the order mix

Time discount  Introductory discount

Loyalty discount

 Early order discount/ early booking discount

 Discount for "loyalty" of a customer to a particular company measured in time

 Seasonal discount

 Discount for a follow-

 Sell-out discount

up order from the same customer

 Discount for a specific sales amount of the same customer in a certain period of time

Fig. 5.34  Discount types

It is exciting that the term discount as well as visual reinforcers such as “€ 50 price advantage for you” directly target the customer’s reward systeme. Thus, the analysis of the effect of discount symbols in the course of neuro-marketing research has shown that their presentation generally activates the reward center in the brain. In corresponding research, increased activity was found in the regions associated with reward expectations. In some of the subjects, lower activity was also observed in the brain areas responsible for self-control. As a result, the price was no longer questioned. In contrast, these effects were not observed with discounted higher-priced products. Consequently, the generally more cautious purchasing behaviour observed here remains with such products (cf. Häusel, 2016). However, if discounts are used too frequently, habituation effects also set in quickly. The discount days at Praktiker over many years – slogan: “20% off everything – except pet food” – led to significant declines in sales and earnings and ultimately to the company’s bankruptcy in 2013. A very powerful tool to work with prices is couponing. Couponing is an action in which a publisher provides a credential (equivalent to coupon) to a select group of people through a medium. Classically, these coupons are offered free of charge. By using a coupon at a certain online or offline acceptance point, a specific advantage is promised for a defined period of time. For this, the coupon user has to show a certain behaviour. In the following, different coupon design options are shown. Individual variants can be further combined as desired to obtain innovative coupon variants (cf. Fig. 5.35). The most important coupon types in use today are presented below. • Information coupon This coupon represents a voucher to get additional information. The most frequent application is in the form of so-called coupon catalogues. These contain a large number of coupons which, when presented or sent in, provide exclusive information. Such coupon catalogues are distributed during Eurowings flights.

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Options for coupon development Publisher  Manufacturer (brand, industry in general)  Service provider  Sales channel

Places of acceptance  Internet shop  Offline POS  Other distribution partners

Recipients  Prospects/leads  Active customers  Former, inactive customers  Target customers (within a specific region or age cohort)

Timeframe  ... of the coupon‘s validity (e.g. can only be used until …)  ... of the coupon‘s distribution (before, during or after purchase)

Media  Advertisement, leaflet, insert, flyer  Mailing, e-mail, newsletter, coupon portal, website  Dispenser, coupon machine, sales force  Product

Advantage  Price advantage  Volume advantage  Additional products  Information

Coupon  Coupon  Text (SMS) coupon  E-coupon  Receipt with corresponding imprint

Behavior  Purchase of a certain product, a defined quantity  Usage of selected sales channel  Purchase within defined timeframe  Provision of information

Fig. 5.35  Options for coupon development

• Discount coupon/cash coupon The user of this coupon is granted a price reduction for a specific product, for a product group or for the entire purchase in a specific sales channel. Either the price advantage is shown as a € amount or as a percentage. • Loyalty coupon/mail-in coupon This type of coupon can take the form of a discount/cash coupon – as a reward for a long-term customer relationship – and lead directly to a price advantage. Mail-in coupons require the customer to provide proof of purchase through coupons. These coupons are either on or in the product. Often they have to be collected and sent to the company (therefore mail-in coupon) in order to receive a benefit. This variant is used in particular by manufacturers’ brands. • E-coupon An e-coupon can be used for orders on the Internet. Very often, companies offer their website visitors an e-coupon as a reward for subscribing to a newsletter. Thalia motivates stationary customers with an e-coupon to make purchases in the online shop www.thalia.de. This type of coupon is also used for cross-promotions. A € 5 coupon is printed on the packaging of Weihenstephan milk, which can be used when ordering from a certain online shop. • Pre-sales vs. after-sales coupon The pre-sales coupon is distributed in advance of a possible purchase in order to trigger such an act. Procter & Gamble uses this coupon variant extensively with its For me programme to promote the purchase of its branded products (cf. For me, 2021).

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In the case of after-sales coupons, the coupon is presented directly after a purchase. This can be done by printing the coupon on the receipt or by handing it over by the sales staff. The aim is to trigger a repeat purchase. For this purpose, special advantages are offered for a follow-up purchase (within a certain period of time). This variant is often used in the Payback program. • Single- vs. multi-level coupons Single-level coupons are those where the issuer and the point of acceptance are identical. This is the case when DM Drogeriemarkt sends coupons via the Payback customer loyalty programme to selected customers for redemption on its own premises. In the case of multi-level coupons, the issuer and the point of acceptance are different. Then a company (Coca-Cola) offers a quantity discount which is granted in the participating retailer (Edeka). The processing of the associated payment flows is the domain of the clearing houses. • Chargeable advantage coupons A special form of coupons has been established with online coupons. Prospects can purchase such coupons via platforms such as Groupon. Here – for a limited time – particularly attractively priced offers are presented. The high time pressure – often represented by a countdown – is intended to motivate prospects to make spontaneous purchases. In order to anchor couponing in strategic customer care, it is advisable to align the use of a couponing strategy with the customer relationship life cycle already presented (cf. Fig. 4.12): • In the acquisition phase, the primary goal is to generate prospects in order to encourage them to make initial purchases. This is where the steering function of the coupon is required. The goal can be the visit of a specific sales channel (online or offline) or the purchase of a specific product. Cash and discount coupons can take over an important incentive function to reduce the purchase resistance of a potential customer. • In the customer loyalty and customer development phase, the task is to provide continuous buying impulses. Discount coupons can be used to increase the purchase frequency and at the same time customer loyalty. Loyalty coupons are aimed at prolonging the customer relationship and thus at creating switching barriers. Their receipt is linked to a certain level of customer loyalty, defined in terms of duration, turnover or intensity of product use. Their control requires a CRM database. If certain benefits are tied to minimum sales, the amount of the average coupon, i.e. the average sales made, can be increased. After-sales coupons serve to extend the customer relationship. They can only be redeemed with the next purchase and provide an incentive to come back. The respective offer of the coupon can be derived specifically from the current shopping cart or previous purchasing behavior. By addressing the target person in this way, the step towards one-to-one couponing has been taken. • In the win-back phase, the coupon variants already discussed can be used to win back particularly valuable customers.

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Coupon catalogues or newspapers and magazines can be used to distribute coupons. However, the target group or individual target persons can also be addressed in a much more targeted and, if necessary, personalized manner. Mailings and e-mails can be used here. The decision on the relevant distribution channel for coupons depends on the existence of the company’s own CRM databases as well as on the amount of turnover or contribution margin that can be achieved through a product sale. Advantages of couponing are the high flexibility and the often short lead time of a corresponding campaign. The coupon issuer decides whether the distribution is to be carried out with a local focus or nationally, whether certain target group segments are to be addressed, selected distribution channels and/or selected products are to be promoted. The precise targeting of coupon use allows measures to “pay in” to specific sales goals in the short term. This can be the increase in the number of newsletter subscribers, the increase in the first purchase rate or the increase in the average coupon. If redemption is tied to certain minimum order values or is targeted at selected, particularly high-margin parts of the assortment, coupon campaigns can pay off in the first step. As with all marketing instruments, there is also a risk that couponing will have an attrition effect. This is particularly likely if – as has already happened in some cases – there are outright coupon battles in which broad consumer groups receive undifferentiated coupons. This could lead to a habituation effect with the consequence that customers postpone their purchases until they receive a suitable coupon. Customers may also react with reactance (the counterpart to acceptance) due to coupon inflation and drop out completely. While coupons are generally used to grant discounts to individual customers or certain customer groups, the question arises as to how companies proceed in the event of price increases. In the discussion of price elasticity, it has already become clear what a lasting negative effect price increases can have on the quantity demanded and on sales. For this reason, attempts are often made to disguise price increases. By not clearly highlighting a reduction in the number of units or the volume per packaging unit at the same price, a price increase is implemented which – if it remains “undetected” – does not lead to a decline in demand. Such disguised price increases are regularly uncovered by Stiftung Warentest in the case of nappies, soap, cosmetic products and hygiene wipes. This context also includes so-called deceptive packaging, which pretends to the customer that the filling quantity is larger than the actual quantity contained in the packaging. Due to the size of the packaging, this is intended to signal to the customer a quantity that is not actually reached. Investigations by consumer centers have repeatedly found that muesli, rice or cream packs contained an average of 40% “air”. In addition, it has been observed time and again in recent years that large packages (whether of cosmetics, chocolate, fabric softener) were relatively more expensive than smaller containers. It is true that retailers are obliged to indicate prices per 100 grams, per litre or per kilogram. But which customer checks this regularly? Since the buyer generally expects a price advantage with a larger purchase quantity, these are examples of how consumer confidence in the brand is abused.

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Price incentives can also be used by companies in mature markets to create an absorption capacity for new products. Companies regularly offer so-called trade-in premiums or exchange premiums. Here, a customer who returns old products is credited with a monetary value towards the purchase of new products in the same category. Companies such as Fissler, Silit and WMF regularly offer to credit € 10 for each old pot when certain products are purchased. Trade-in bonuses are now also offered by various providers for products such as smartphones. Here, the sales value of the old device is deducted from the purchase amount of the new device. The relevance of such concepts is easily explained: exchange bonuses are initially intended to ease the guilty conscience of hesitant customers to replace a product that is often still fully functional. Motto: “But I still get something for it!” In addition, the exchange action quite “makes room” for the new product. The ecological consequences of such an approach are open to debate. With regard to price changes, the question for companies is whether they prefer to take a leader or follower position in this respect. Price leadership is held by the company that initiates a round of price changes in an industry, be it upwards or downwards. While price increase rounds (e.g. for petrol) often receive a broad negative media echo, the corresponding companies tend to have to point out new “permanently low prices” themselves in the case of price reduction rounds (e.g. at food discounters). In the mineral oil trade it is often visible that the price leadership changes between the brands so that the image of price driving does not arise with one supplier. Price followers are all companies that adjust their prices in the same direction as a result of the changes made by competitors. cc

Memory Box  The concept of price leaders and price followers can be observed especially in oligopolistic markets. Here, the price changes of one company have a clear impact on the sales of the other suppliers.

5.2.3.2 Price Differentiation as a Special Instrument of Static Price and Condition Setting In price differentiation, different prices are charged for (almost) the same services. Which prices are charged in each case depends on various criteria. Price differentiation belongs to the static price strategies, since these strategies are used in a constant form over a longer period of time. In order to carry out price differentiation, several requirements must be met: • Firstly, the target group must be able to be divided into at least two different segments. Only then can different prices be used. • Secondly, the defined target groups must have different price elasticities. Only then does a differentiation of prices among the various target groups lead to the desired result. • Thirdly, it must be possible to delimit the identified segments. Only then can different prices for the same offer exist on the market at the same time. The different types of price differentiation are shown in Fig. 5.36.

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Types of price differenciation Reference point

Term

Implementation Free current account for students, student subscription

Person

Personal price differentiation

Region

Spatial price differentiation

Price differences for identical cars or identical medicines in different EU countries

Timeframe

Temporal price differentiation

Low prices in the early and late seasons, high prices in the high season; airfares according to time of flight, early booking discounts; happy hour offers in clubs

Service

Performance-related price differentiation

Various prices for 1st and 2nd class travel on Deutsche Bahn or in Lufthansa´s First, Business or Economy Class

Quantity

Quantity-based price differentiation

Granting of volume discounts for bulk buyers

Distribution channel

Distribution channelrelated price differentiation

Different conditions for online and offline bookings; different rates for online and offline services (brokerage, banking); discounter vs. department store

Demand mix

Price bundeling, bundling, tying offer

Customers who purchase several products together are granted a lower price

to newspapers and magazines; senior citizen rate at museums.

Fig. 5.36  Types of price differentiation

cc

Memory Box  The general guiding idea of price differentiation is that a company can better achieve its sales or contribution margin targets if prices are set according to various criteria and are thus “differentiated”.

The reasons for the personal price differentiation and spatial price differentiation are mostly the different price elasticities of the customers. In the case of the target group of students, it is generally assumed that they have a lower purchasing power than people who are fully involved in their working lives. In order to attract students to one’s products, this target group is offered a lower price for the same product. Students will pay only € 39.80 instead of € 78.50 per month for a subscription to the Frankfurter Allgemeine Zeitung (“Monday to Sunday”) in 2021. The online subscription costs students € 31.40 instead of € 48.90. Food for Thought  By the way, every student of economics and every high achiever in politics, business and society is recommended to be regularly informed by one of the leading newspapers. This money is very well invested in one’s own qualification – and also promotes personal growth. Reading is also great fun! And no: Getting information only from supposedly free sources of information such as Facebook, Instagram, YouTube & Co. is not enough today (cf. on the dangers of digital seduction Kreutzer, 2020).

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The different price elasticities often explain the diverging prices for the same offers in different countries. These diverging price elasticities can usually be traced back to differences in purchasing power between countries. To make these differences in purchasing power visible, the Big Mac Index of The Economist magazine is used. What is this index all about? The Big Mac Index makes the differences in purchasing power between countries visible. The index shows how much a Big Mac costs in individual countries. The burger from McDonald’s is so well suited for an international price comparison because it is offered worldwide in a standard version. At the same time, the price of the burger must be adjusted to the purchasing power of the target markets so that as many people as possible can afford the Big Mac. In order to show the index values in a uniform way, the prices of the different currencies are converted into US-$. The highest price for a Big Mac is 7.29 US-$ in Switzerland, followed by Sweden with 6.37 US-$. At the other end of the scale are Russia at US-$1.81 and Lebanon at US-$1.77. It is easy to understand that the Big Mac in Russia would hardly sell at the price from Switzerland. The price of a Big Mac is US-$5.66 in the USA and US-$5.16 in the Eurozone (see Economist, 2021). In the international context, the term dumping is often used in discussions about prices. International dumping is prohibited under the rules of the World Trade Organization (WTO). The WTO prohibits exporters from offering products and services abroad below the price at which they sell these goods domestically (cf. WTO, 2021). In order to determine whether dumping is taking place, the offer price for domestic sales of the same good is taken as the reference price and used to assess pricing in a foreign market. In addition, surcharges for transport costs usually have to be taken into account. Companies try to gain market shares in other countries by dumping and to force existing companies out of the market by aggressive pricing. Social dumping is the term used when export products can be offered at a lower price than products manufactured in the destination country itself due to low labour and ancillary wage costs. One reason for low ancillary costs can be the lack of social security systems. Often there is no health, pension, accident or unemployment insurance for the employees. In addition, production often takes place under unfavourable working conditions. In some cases there is even child labour. However, social dumping in the legal sense does not constitute dumping. After all, the price differences here are actually caused by different location costs. On the one hand, combating social dumping can pursue the goal of actually improving working conditions and pay in the countries of origin (cf. Wiesner, 2016). On the other hand, interest groups also pursue the goal of protecting domestic industry from undesired cheap imports by accusing it of social dumping. A geographical price differentiation may also be necessary due to different tax systems in the target countries. When buying a car, a Danish consumer has to pay a registration tax of currently up to 150% in addition to VAT. This is also referred to as a luxury tax. As a result, privately registered mid-range cars in Denmark are often more than twice as expensive for Danish customers as for a customer in Germany. Therefore, many manufac-

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turers see themselves forced to reduce the pre-tax prices for cars to a minimum in order to sell them in Denmark at all. Different market positions the seller may also require different pricing. If a company is the market leader in a country, it may be able to charge higher prices than if it were a new entrant. Time-based price differentiation has three different characteristics: • The price can be differentiated depending on the time of purchase in relation to the time of use. Early booking discounts fall into this area. Here, customers who book at an early stage are rewarded with price reductions. This pricing strategy is used by Deutsche Bahn and also by hotels and airlines. A flight “Cologne-Bonn – Berlin” is offered many weeks or months before the departure date for € 39.99 (one-way complete price). One day before the departure date, the same flight costs € 299.99. This pricing strategy is referred to as yield management. By setting differentiated prices, companies aim to achieve the best possible utilization of existing capacities. Customers should be motivated by attractive prices to book as early as possible. This increases the planning reliability of the companies. At the same time, customers are tied to a provider at an early stage. Customers can then no longer succumb to the “temptations” of competitors. After all, rebooking is often only possible at high cost. • The price may also vary depending on the time of use. This is the case with all travel offers that stagger their prices according to low, high and post season. The dominant objective behind this pricing is to steady demand. It is about capping peaks in demand and filling gaps in demand. Thus, a tour operator pursues the goal of shifting demand from the peak season to the early and late season. After all, even in the peak season, a supplier can only use its capacities (be it hotels, restaurants, aircraft, ships) to a maximum of 100%. Admission prices and cocktails at happy hour prices also belong in this category. With happy hour offers, museums, restaurants and bars try to “attract” customers at times of low demand in order to utilize their own capacities more evenly here as well. The different prices for TV and radio advertising time inside and outside prime time serve the same purpose. Companies that want to invest less in advertising place their commercials outside prime time – even if they then reach fewer people. A particularly striking example of prime time is the US Super Bowl. The average cost of a 30-second TV commercial in 2021 is US-$ 5.6 million (cf. Statista, 2021a). • The price may also fluctuate based solely on the time of purchase – regardless of when the acquirer uses a product. Thus, special sales can take place at certain times. Summer and winter sales come to mind here, even though they have been officially abolished. Black Friday and Singles’ Day also fall into this category. A special form of personal and temporal price differentiation is finding ever wider use: dynamic pricing. At Amazon, many prices are changed multiple times throughout the day. Dynamic pricing is based on the realization that shoppers’ price elasticity varies at different times. Therefore, revenue for businesses can be optimized by offering different prices to customers.

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Other factors have an effect on the individually offered, dynamically played out prices: If the potential buyer deals with the offer for the second or third time, this indicates a high level of interest. Consequently, this person will probably also be willing to pay a higher price. Those who access offers with Apple products may be shown a higher price. This is based on the hypothesis that Apple users have a higher purchasing power and therefore also accept higher prices. It is obvious that customers are often not enthusiastic about such an approach. Service-related price differentiation is an attempt to differentiate a similar service in such a way that it can be offered in different price groups. This includes different room facilities in the same hotel as well as the differentiation between first and second class with Deutsche Bahn and between First, Business and Economy Class with Lufthansa. A Frankfurt-New York flight on the same route and at the same time costs from € 488 in economy class, from € 1090 in premium economy, from € 2200 in business class and from € 4600 in first class (cf. Lufthansa, 2021). This approach is intended to exploit customers’ different willingness to pay prices in order to achieve higher added value for the company. It is already clear from the examples given here that price differentiation in these cases is already accompanied by more or less comprehensive product differentiation. In Lufthansa’s First Class, for example, a multi-course menu (including caviar, wine, champagne and espresso) is served on china. There are also seats that can be converted into comfortable beds. In contrast, in Economy Class, which is called “Wood Class”, a “cardboard bun” (including various “side dishes” sealed in foil) is often served in a box in a very small space. However, the basic service is identical in both cases. In the first class of the Deutsche Bahn one is served not only at the place. There are also various newspapers offered free of charge. The space available is also much larger. cc

Memory Box  Instead of price differentiation, one should always speak of product differentiation when the offers differ significantly. The use of different materials (artificial fibre vs. cashmere wool or artificial leather vs. genuine leather) for identical products is also a product variation and not a price differentiation.

In quantity-based price differentiation, the price is adjusted based on the quantity demanded per buyer. This is the case when the glass manufacturer Riedel sells eight handblown glasses for the price of six. The same mechanism comes into play when several people use services at the same time. A family of four can book a holiday for the price of three. Here, the already mentioned quantity discount is granted. In the case of distribution channel-related price differentiation, prices differ depending on the extent of self-service provided by the customer. The rates for online and offline banking differ. There are also different prices for tickets that are either purchased at a travel agency or booked and printed out online. In the case of online brokerage, the rates for the service differ compared to the traditional ways of purchasing shares. The original concept of factory outlets was also based on a distribution channel-related price differentiation: without advice, in “factory-like” surroundings and partly without

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changing rooms, brand clothing was still offered at significantly reduced prices in the 1980s and 1990s. Today, the facilities of these outlets are often comparable to those of upscale fashion stores – not only in terms of ambience, but also in terms of expertise in providing advice. The outlets are now also thousands or tens of thousands of kilometres away from the “factories”. Price differentiation by distribution channel is also found in the catering sector. In retail, a bottle of San Pellegrino mineral water (1 liter) costs around € 1. In a simple restaurant, it costs € 3.40. In a three-star restaurant, the same mineral water costs € 19.50. The same applies to manufacturers´ brands, which are offered much more cheaply at discounters than at traditional grocery stores. Price bundling occurs when different products are combined into a package for which a bundled price is to be paid. This is also referred to as pricing bundle, bundling or bundled offer. A bundle price is usually lower than the sum of the individual prices of the products purchased together. Examples of bundled prices are package tours or “all inclusive” offers from tour operators. The Microsoft Office package bundles the programmes Word, Excel, PowerPoint and Outlook and offers them at a significant discount compared to the individual programmes. PC and laptops are often also offered with pre-installed software – price advantage included! cc

Memory Box  People like to buy “package deals” – associated with the idea that

they have made a particularly clever purchase.

Even in restaurants, a four-­course meal is usually less expensive than ordering the individual courses. Under certain circumstances, however, the portions in the menu are smaller. In addition, some restaurant managers count on the fact that the consumption of beverages increases due to a longer stay in the restaurant associated with the menu. These are often calculated with a higher contribution margin. Thus, additional effects of the calculatory compensation described below flow into the consideration. Price bundling can also be found in hotels. Here, complete prices are often advertised. It is then called “room rate, incl. breakfast, € 126” instead of individual prices such as “room rate € 102, breakfast € 24”. Many bank services are also offered in bundles, e.g. a current account combined with a credit card. Price bundling deprives the customer of the possibility to compare individual prices. In this case, bundling leads to price concealment. In the case of price increases of package offers, it is also not comprehensible which service has become more expensive by how many percent. Service providers, such as management consultancies and advertising agencies, also prefer package prices in order to make it more difficult to trace the individual prices. Bundled offers also increase the revenue per purchase. Often, new customer groups can be tapped by making the offer more attractive. In order to be able to compare offers precisely, the system price or the total cost of ownership (TCO) must be calculated. For this purpose, in procurement processes – espe-

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cially for industrial goods – all expected future costs must be taken into account in addition to the purchase price for a system. This includes maintenance, spare parts, upgrades, training and adjustments. The TCO approach was developed in the IT environment, but is also suitable for other major purchases. However, the total cost of ownership should also be determined in the private sector, when purchasing a car or a property. By taking a broader perspective, unpleasant surprises on the cost side can be avoided. When buying a car, in addition to the purchase price, the costs for inspection, winter tires, garage as well as taxes or insurance must be taken into account. When purchasing real estate, the amounts for land transfer tax, land register entry, notary services and real estate agent amount to 10% of the purchase price. In addition, homeowners insurance must be taken out and reserves for repairs must be set aside. In both cases, larger amounts are added to the actual purchase price. Food for Thought  Calculate your personal Total Cost of Ownership for a recent major purchase.

5.2.3.3 Compagnion Pricing as a Special Instrument of Static Price and Condition Setting Using compagnion pricing, different products that are sold either simultaneously or consecutively are offered with different costing markups or markdowns. This concept is also called pricing policy compensation or mixed costing. Simultaneous imputed compensation occurs when a passenger car is offered at a low starting price. Such a vehicle without all extras is also referred to as a “strip-down version”. When selling such a “strip-down version”, the company would only generate a low contribution margin. Therefore, the sales process tries to motivate the customer to purchase optional extras or equipment packages. These are consistently calculated with higher contribution margins. With these equipment packages, price bundling again takes place. The services offered in a package cannot be purchased individually. Therefore, there are no individual prices for these services. This achieves two things: the vehicle has an attractive entry price as an eye-catcher in the “strip-down version”. This is important because buyers are much more price-sensitive when it comes to the vehicle itself than when it comes to the additional equipment. Here it is then said: Why should I not also treat myself to the Bose equipment for € 2000 in a vehicle for € 40,000? Based on the knowledge that cars are rarely purchased without extras, the company achieves a higher profit through compagnion pricing. A successive imputed compensation exists if a product is initially sold with low or even negative contribution margins. In order to use the product, however, additional services must be purchased from the same company. These additional services are calculated with significantly higher contribution margins. Here, the purchase of an inkjet printer for € 69.99 is to be considered. In order to use the printer, the ink cartridges, which are calculated with a higher contribution margin,

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must be purchased regularly. After just a few purchases, more money has been spent on the cartridges than on the printer itself. This optimizes – from the company’s point of view – the contribution margin for the service package over time. cc

Memory Box  In the case of successive imputed compensation, interconnec-

tion effects between different offers are taken into account when setting prices.

Since such compound effects are also exploited in razors and razor blades, this pricing approach is also referred to as the razor-blade model. There is also talk of a lock-in product. After all, there is virtually no “escape” possible for the customer – at least for a limited time – if one wants to avoid throwing the printer out the window – only to find oneself in the same dependency again with the next purchase! Such economies of scope also underlie the pricing strategy for the marketing of game consoles (such as the Xbox or the PlayStation). In some cases, these devices are sold below the production price in order to subsequently generate a profit through the marketing of games. The same concept is found in the marketing of mobile phone contracts. A highly subsidised mobile phone (offer at € 1) is only for sale together with a two-year contract. The associated financial “pitfalls” only become apparent to those who also study the terms and conditions intensively. In my opinion, the successive imputed compensation can also be described as a Trojan price strategy. The customer is often not aware of the cost-driving product combination at the time of purchase. cc

Memory Box  In both simultaneous and successive compensation, the company’s goal is to optimize its own overall result. To achieve this, a financial balance is sought between high and low profit products or product parts. This is done either at the same time or over time.

5.2.3.4 Special Forms of Static Pricing and Conditions In recent years, an additional pricing strategy has gained in importance: the flat rate. A flat rate is a fixed price that covers the unlimited use of a good. Such flat rates are offered for landline and mobile telephony. The monthly fee covers the unlimited use of certain networks. Flat rates are also offered by streaming services. For a monthly fee of € 9.99, premium customers can access the entire Spotify offering. Access to the Netflix offers is already possible from a monthly flat rate of € 7.99. The most expensive subscription will cost € 17.99 per month in 2021. Then unlimited movies and series can be watched on the smart TV or on smartphone, tablet, game console or computer. Another important pricing strategy is called freemium. Freemium is a made-up word of the terms “free” for “free of charge” and “premium”. Freemium refers to a pricing strategy in which a basic product is offered free of charge in order to attract as many users

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5  Marketing Tools Share of services in the offer High Services Services Services

Services

Products

Products

Products

Products

Products

Low

Time

Fig. 5.37  Servitization: from product to service – from service to service

as possible. Those who want to use the full product and/or the extensions are asked to pay. This pricing model is used by XING and LinkedIn. In some cases, however, the free service is “bought” by accepting advertising – as is the case with Spotify. In the economy, a further trend can be identified that goes hand in hand with an increase in the importance of the services offered and has an impact on pricing. The trend shown in Fig.  5.37 is called servitization. Servitization is the term used when manufacturing companies shift their portfolio away from physical products towards services and/or a combination of tangible goods and services. The increasing range of product-related services has already been discussed. In other areas, digitisation is blurring the boundaries between physical products and intangible services. Instead of CDs and DVDs, people are streaming; instead of buying printed books, newspapers and magazines, their contents are accessed online as needed – often for a fee. Examples of this development in the consumer market are Fashion as a Service, Mobility as a Service, Food as a Service and Renting as a Service. A particularly exciting concept of servitization are the so-called subscription models. Here, it is no longer individual products that are sold, but entire service packages. Such offers are available for the following products: • • • • •

Aircraft turbines from Rolls-Royce; motto: Power by the Hour Printing presses from Heidelberg; motto: Pay per Use Machine tools from Trumpf; motto: Pay per Part Lamps/lights from Philips; motto: Pay per Lux Cars from Volkswagen/Audi; motto: Pay per Month

In these cases, no product is purchased, but rather use is enabled and paid for. The product, which was originally the focus of the business model, is here completely embedded in a

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service offering. The provider makes the products available, often including consumables, insurance, financing, etc. – and the user only pays for the services that he or she has actually used (cf. Kreutzer, 2022; Simon, 2015, pp. 239–242). Food for Thought  Where have you already been able to identify the trend towards servitization in your personal environment?

cc

Memory Box  The dichotomy of product and service must be overcome. Products are to be thought of as services! The trend is: from product to service!

5.2.4 Dynamic Pricing Strategies A dynamic pricing strategy exists if it is already clear when the price is initially set that the price is to be changed over time. This means that these pricing strategies differ substantially from those shown in Fig. 5.33. In detail, the following concepts can be distinguished (cf. Fig. 5.38): • • • •

Skimming pricing strategy Penetration pricing strategy Follow-the-free strategy Follow-the-cheap strategy

Price 10 9 8 7 6

Skimming pricing

5

Penetration pricing

4 3 2 1 0

Fig. 5.38  Dynamic pricing strategies

Follow-the-cheap strategy Follow-the-free strategy Time

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In the skimming pricing strategy, a product is initially introduced to the market at a high price (cf. Fig. 5.38). Over time, the price is reduced further and further. In this way, the customers’ willingness to pay is successively skimmed off. Skimming pricing is often used for technological innovations. For example, the first flat-screen TVs still cost many thousands of euros. This was the price initially paid by the innovator target group already mentioned (cf. Fig. 5.19). The first digital cameras, tablet computers, virtual reality glasses, etc. also come to mind here. For first releases of CDs and DVDs as well as for books (with initial hardcover editions and paperback versions appearing later), this pricing strategy is also regularly applied. With each price reduction, additional target groups can then be addressed and won over for the product. For the company, this pricing strategy initially leads to high contribution margins per unit with a still relatively low sales volume. A low sales volume at the time of market launch is advantageous for companies because often only small quantities are produced at the start of production. As production volume increases and experience curve effects can be realized as a result, the price can be gradually reduced without this having to be at the expense of profit. Apple is a good example of the skimming price strategy. The iPhone with 8 GB memory was offered for US-$ 599 at its premiere in the USA on 7 June 2007. On September 6, 2007, the price was already only US-$ 399. On July 11, 2008, the price was US-$ 199, on June 19, 2009, US-$ 99, and finally on January 10, 2011, only US-$ 49 (cf. Simon, 2015, p. 209). However, this pricing strategy entails the risk that competitors may feel motivated to enter the market themselves due to the supposedly high return on sales in view of the high prices. Therefore, the gradual price reduction can also be used as a defensive measure against competitors. At the same time, high prices lead to a greater time requirement for achieving market penetration because price-oriented customers postpone their purchases until the next price cuts are implemented. In the penetration pricing strategy, an offer is initially introduced to the market with a low price (cf. Fig. 5.38). This strategy is often used by stragglers who enter a market as the “umpteenth” supplier to attract attention by offering a competitive price. Since the price is often a central purchasing argument, larger sales volumes can often be achieved quickly. Since companies may initially forego contribution margins in this approach, it is said that such companies “buy the market”. Often the increase in prices is accompanied by a qualitative development of the offers. The new suppliers also learn and can further develop their products. This pricing strategy was used by Japanese carmakers when they entered the European and US markets in the 1970s. South Korean producers used the same approach in the 1990s. The global entry of Chinese manufacturers also used this strategy. While the quality of the new suppliers was initially “smiled at” in the countries supplied, the example of the Japanese and South Korean manufacturers showed how a price-focused market conquest was followed by a qualitative further development of the products – with a corresponding adjustment of the prices.

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The penetration price strategy can be well understood in the presentation of Toyoto’s luxury brand Lexus in the USA. There, the Lexus LS400 model was introduced in 1989 for US-$ 35,000. In the following years the price was raised step by step. From US-$ 35,380 (1990) via the steps 39,000 (1991), 42,600 (1992), 47,030 (1993) and 50,370 (1994) the price finally reached US-$ 51,680 in 1995 (cf. Simon, 2015, p. 207). In the follow-the-free strategy, a company initially offers a service free of charge to all customers. In this way, a large customer base is to be built up and customer loyalty achieved (cf. Fig. 5.38). At a later stage, the same services are given a price. Alternatively, customers can be offered higher-value, fee-based services while the free service is dropped. Many online companies initially started with free services for the user. In this way, many customers are to be acquired in a short time in order to make the relevance of one’s own business model visible to investors. However, at some point in the not too distant future, revenues must be generated in order to reach the profit zone. Then the free phase is over and customers are asked to pay. In the case of the follow-the-free strategy, a distinction can be made between two types: • The customer is already aware at the time of initial use that the service is only offered free of charge to everyone for a limited period. • The customer assumes that the service will be permanently free of charge. Contrary to the customer’s expectation, the company is already planning to charge for the provision of the service. In both cases, the aim is to get the customer used to the offer so that as many customers as possible remain with the company at the time of pricing. cc

Memory Box  A temporary free use of a service for new customers (e.g. for subscriptions or online services) is not part of this strategy. Finally, this offer – in comparison to the follow-the-free strategy – does not apply to all customers. This offer constitutes a price promotion and is part of sales promotion (cf. Sect. 5.4.3.4).

A follow-the-cheap strategy is often used for product launches in already mature markets. The aim is to generate as many test purchases as possible by setting a low price for all customers. This strategy is used, when introducing new magazines. These are then offered for one or two € during the introductory phase. Low prices reduce the perceived purchase risk for the customer. This triggers many test purchases. If the low price strategy is maintained over a longer period of time and motivates many customers to buy regularly, they can become accustomed to the offer. If the offer is convincing, many customers will remain with the company even if the price is later raised to the target price. If customers have become accustomed to the low price but not to the offer, a price increase will lead to significant customer churn. Therefore, it can be advantageous to clearly communicate the term “new launch for € 1” or “test offer”.

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In contrast to penetration pricing, no further qualitative development of the offer is to be expected with the follow-the-cheap strategy. The price-reduced product already delivers the desired quality. In addition, there is usually only a one-time increase to the price level necessary for a profitable design. This is then maintained in the longer term. cc

Memory Box  A time-limited price-reduced use for new customers (e.g. for subscriptions or online services) does not count as part of the follow-the-cheap strategy. Such a price-reduced test offer does not apply to all customers and is therefore also part of the sales promotion (cf. Sect. 5.4.3.4).

5.2.5 Cross-Product Aspects of Pricing and Conditions Policy A further sub-area of the price and conditions policy comprises the terms and conditions of the payment of fees. This goes beyond the discounts already mentioned. With the granting of sales credits and instalment payments, companies have important sales-­ promoting measures at their disposal. In many cases, it is only these payment options that enable customer groups with weak purchasing power to make a purchase. This applies to the purchase of household electronics and the booking of travel. In contrast, financing services are the order of the day for car and real estate purchases. In addition, companies must define their terms of delivery. In international marketing, the term Incoterms (International Commercial Terms) is used for this. These can clarify the following points, which are also particularly important for online trading: • • • • • • •

Place/time of transfer of goods Delivery time (e.g. same day, within 24 hours, 2 days or 1 week) Sharing of transport/insurance costs between trader and customer Minimum purchase quantities Penalties for non-compliance with agreements Exchange/cancellation options (to reduce the perceived risk) Place of jurisdiction

Companies also try to differentiate themselves in the competitive environment through their warranty regulations. This is particularly successful when the company’s own regulations go beyond the legal requirements. This is the case with the clothing mail order company Lands’ End (2021) with the following guarantee promise: All items purchased from us can be returned at any time. Within Germany, a return shipment with the Hermes Logistics Group is free of charge for you. For this we need the customer number under which you purchased the item. (Name and address of the purchaser are also sufficient in most cases to determine the appropriate customer account).

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The original purchase amount will then be credited to the customer account of the buyer and paid out by bank transfer or as a credit card booking. A payout in favour of a third party is not possible.

The statement “All items purchased from us can be returned at any time” can be melted on the tongue once. The company accepts here that even worn goods can be returned after several years! In addition, after-sale guarantees can be given. Such an after-sales guarantee is important for porcelain or exquisite glasses. An after-sales guarantee can also promise a secure supply of spare parts. However, such services are reflected in the prices. Finally, there is a serious difference between the marketing of a special edition of a certain type of glass on the one hand and the promise to the customer on the other hand that he or she will be able to buy the purchased products for the rest of the life. This is the case with the Sommelier glass series from Riedel. The silver manufactory Koch und Bergfeld (2021) formulates under the term post-­purchase: “Since the year 1835, for example, all drawings of models and individual pieces designed by Koch & Bergfeld have been recorded in the drawing books, the so-called “Folianten”. This makes reproduction easy. But not only that: Koch & Bergfeld is able to copy every single silver piece – no matter where it comes from – or to produce it according to a drawing”. Innovative price offers also result from the fact that concepts familiar from selected sectors are adopted by other companies. This applies to subscriptions, which are now also offered for wine. At HAWESKO (2021), the wine subscription HAWESKO Select is presented as follows: HAWESKO Select Classic, red and white Wine selections that will delight you! Do you love high-quality wines and like to be inspired by new discoveries on a regular basis? Then the HAWESKO Select wine selections are just right for you. Every three months, you will receive the selections conveniently delivered to your home by subscription. You will not only be delighted by the wines, but also by the price. With each wine subscription selection you save at least 20% compared to the retail price and receive a € 100 shopping voucher from us as a thank you. The wine subscription is also perfect as a gift – or you can make yourself a nice present.

Corresponding concepts can also be found in subscriptions to chocolate, razor blades, nappies and textiles. The advantage of such concepts for the company offering them is that customers are committed for the long term and do not have to be won over again each time. At the same time, the ability to plan is improved because certain purchase quantities are bindingly defined for the year. cc

Memory Box  These explanations underline the central importance of the price

and conditions policy in the marketing diamond  – and how creatively this instrument can be designed. At the same time, all the ideas presented here must be integrated into a consistent marketing approach in order to convince customers. 

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Things to Keep

• The price is a marketing instrument with a very fast and lasting effect – and has a massive impact on the profitability of the company. • A price is only ever optimal with regard to very specific corporate and marketing goals. • A large number of legal framework conditions restrict the entrepreneurial possibilities of pricing. • Pricing can be based on the cost of production, competitors and/or customers. • Price elasticity is of central importance in customer-oriented price determination. This price elasticity shows which change in quantity is triggered by a price change and which changes in sales are associated with it. • The price serves as a quality indicator in certain cases. • Different types of discounts are used to influence the sales partners as well as the customers. • Couponing is a powerful and flexible tool for influencing shoppers. • Prices can be differentiated for (almost) identical services according to different criteria. • A distinction must be made between static and dynamic pricing strategies.

Questions to Check Your Level of Knowledge

1. Which fields of action does the price and conditions policy cover? 2. What are the key influencing factors that need to be considered in pricing? 3. What is the “optimal” price for a particular company based on? 4. Define the snob or Veblen effect and show in which areas it is relevant. What relevance do these effects have for pricing policy? 5. Show whether and, if so, what conflicts of interest may exist in pricing between manufacturers, trading partners and/or end customers. Give examples. 6. What are the different approaches to cost-based pricing? 7. What is the approach to full cost pricing? What are the advantages and disadvantages associated with this concept? 8. What sales price must a company set with the following data situation: Annual profit target € 50,000, € 2 variable costs per unit, fixed costs per year € 50,000, forecast sales volume 50,000? 9. At what sales price does the company reach the break-even point? 10. What is the approach to pricing on a partial cost basis? What are the advantages and disadvantages associated with this concept? 11. What is target costing or target pricing? How is it done and why? What positive effects are associated with it?

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1 2. What is price elasticity of demand? For which questions is it relevant? 13. Sketch a price-sales function and calculate different price changes. Determine the different elasticity ranges. 14. What are the consequences of a price increase in the elastic as well as in the inelastic part of the price-sales function? Justify the relevance of these findings. 15. What are the ways in which price elasticities can be determined? 16. Which is usually greater: the price elasticity or the advertising elasticity? Why? 17. What is behind the term cross-price elasticity? What types of relationships between products can be identified using this measure? 18. What is meant by the statement “price as a quality indicator”? In which situations does this effect come into play? 19. Explain the different effects that a high price can have on the consumer’s purchase decision process. Illustrate these effects with an example of your choice. 20. Which discount types can be distinguished? Which effects are aimed at by the use of different discount types on the different target groups? 21. What is meant by couponing? What are the goals associated with its use? 22. What types of coupons can be distinguished? Which goals are aimed at with their use? 23. What are the advantages and disadvantages of couponing? 24. What is meant by a “cheat pack”? How do you evaluate their use? 25. What is meant by trade-in premiums or exchange premiums? In which markets are they used and for what purpose? What examples of this have you already come across? 26. Define the terms price leader and price follower. What is the importance of these terms in oligopolistic markets and why? 27. What are the differences between static and dynamic pricing strategies? Give examples of their use. 28. Which approaches to price differentiation can you distinguish? State the background for the necessity of price differentiation. What goals do companies associate with its use? 29. What requirements must be met for price differentiation to be successful? 30. Research two examples each of the different types of price differentiation on the Internet. 31. What types of price differentiation have you already benefited from yourself? 32. What is dynamic pricing? Where is it used and why? 33. In which fields are flat rates offered? What is their special feature? 34. What is the freemium pricing strategy? Where is it used? What examples do you know? 35. What is the basic concept behind the Pay per Use or Pay as You Go pricing strategy? 36. What is price dumping and what is social dumping? What examples are you familiar with? 37. What is the meaning of the term TCO? When should you place particular emphasis on determining the TCO? 38. What is meant by imputed compensation? What types are distinguished? What examples can you think of from your own environment?

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39. What are the characteristics of skimming pricing? What advantages are associated with it for the company? What risks are associated with it? 40. Which customer groups are initially targeted by skimming pricing and why? 41. What characterizes penetration pricing? What are the advantages for the company? What risks are associated with it? 42. Which customer groups are initially targeted by penetration pricing? 43. What is behind the follow-the-free concept? In which areas is this approach used? 44. What is meant by the follow-the-cheap concept? In which cases is it used? 45. What are the options for the conditions? What is the significance of these in the marketing diamond? 46. Which subscription concepts are you familiar with? What advantages do these have compared to the classic sales concepts?

5.3 Distribution Policy If you don’t have a friendly face, you shouldn’t be in business! Chinese wisdom Learning Objectives

Ability, • to understand the importance of distribution policy in the marketing diamond • to master the different fields of distribution policy • to know and use criteria for the evaluation and selection of different distribution channels • to distinguish between types of wholesale and retail • to understand the tasks of marketing logistics

5.3.1 Decision Fields of Distribution Policy Distribution policy is influenced by a variety of internal and external factors (cf. Meffert et al., 2019, pp. 578–629; Homburg, 2020, pp. 940–1006). The central guiding principles for the design of distribution policy are the corporate and marketing objectives. The strategic orientation of the company and the determinations already made in the area of other marketing instruments also have an impact on the design of the distribution policy (cf. Fig. 5.39). Figure 5.39 shows that two task areas make up the core of distribution policy: • Acquisitive distribution Acquisitive distribution from the manufacturer to the end customer involves the question of which sales channels and sales institutions support the acquisition and servicing

5.3 Distribution Policy Internal factors - Sales, profit, market share targets - Desired image - Target segments - Design of the marketing diamond - Costs (e.g. for production, distribution) External factors - Intensity of rivalry - Bargaining power of distribution partners - Price sensitivity of the customers - Phase of product life cycle - Preferred shopping channels - Relevant legal framework

321

Acquisitive distribution policy (management of the sales channel and the sales institutions) - Selection of sales channels and sales institutions - Management of sales channels and sales institutions Physical distribution policy (marketing logistics) - Design/selection of logistic concepts - Implementation of logistics tasks

Fig. 5.39  Influencing factors and decision fields of distribution policy

of customers. In addition to the selection of distribution partners, it must be clarified which pre-sales, sales and after-sales services the selected partners provide. Furthermore, the question arises whether these partners “only” initiate sales contracts or actually conclude them. In addition, it must be examined how to motivate the sales partners. • Physical distribution Physical distribution involves clarifying how the physical transfer of goods from the manufacturer to the end customer takes place. Here it must be decided which logistics solutions will be used and which partners will be entrusted with the respective tasks.

5.3.2 Sales Channels and Sales Institutions At the center of the management of sales channels and sales institutions is the question: Which channels or which partners are to be involved in the acquisitive and physical distribution? The question of the sales channel defines the way through which a product or an service is brought to the target persons. This can be direct or indirect, single or multi-level, online or offline. The question of the sales institutions decides which partners are involved in the sales process. These institutions are called sales intermediaries or sales assistants. Sales intermediaries are legally and economically independent bodies that purchase products and services in their own name and on their own account for resale. These include retailers and wholesalers. Sales assistants are legally and economically independent bodies that support the selling process in various ways without themselves acquiring ownership of the goods. These include commission agents and brokers described below. Logistics companies also belong to these sales assistants.

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Single-level distribution Retailers, sales assistants Double-level distribution Wholesalers

Consumers (B2C) Companies (B2B)

Manufacturer

Direct sales

Retailers

Fig. 5.40  Basic forms of sales

Figure 5.40 shows how sales intermediaries in the B2C and B2B markets can be integrated.

5.3.2.1 Direct Sales In the case of direct sales, the manufacturer handles the marketing of its goods on its own (cf. Fig. 5.40). Here, the manufacturer does not involve any other independent institutions in the sales channel. Due to the increasing importance of this distribution strategy, the term direct-to-consumer (D2C) has emerged. Here, companies market their services directly to consumers, bypassing retailers, wholesalers or other intermediaries. The question then arises as to by whom the corresponding sales tasks are performed. Manufacturers can organise direct sales via their own sales departments, sales branches and/or their own sales force. This is often the case with high-value goods that require consulting. Here, the sale of industrial goods and services in the B2B market comes to mind. This is referred to as personal selling. Here exists a direct contact between the seller and the buyer. Sales representatives often visit company representatives on behalf of a manufacturer in the B2B market in order to offer these persons certain products or services. Personal selling also includes sales talks at trade fairs, rounds of negotiations with the customer and telephone sales calls. A special sales manager is often assigned to particularly important corporate customers. This person is responsible for the acquisition and support of the entire company. This concept is called (key) account management. In this context, a “key customer” is an “important customer”. Deutsche Post looks after its most important customers (e.g. Amazon, Allianz or OTTO) through such key account managers. This is to ensure that these particularly valuable customers receive comprehensive and individual support – to make them stay. In the B2C market, consumers are sometimes visited directly at home. This is referred to as door-to-door selling. This direct sales concept is still used today for the sale of AMC cooking systems, Avon cosmetics, frozen goods from bofrost and vacuum cleaners from Vorwerk. Sales parties of Tupperware also belong to this category. These companies are organised in the BDD (Bundesverband Direktvertrieb Deutschland).

5.3 Distribution Policy

323

90

83.3

Turnover in billion €

80

72.6

70

65.1 58.47 52.74 46.9 42.84 39.1

60 50 40 30 20 10 0

1

5.2 7.4 1.8 2.7 3.6

10 10.9

13.4 15.5

18.3

21.7

27.6

Fig. 5.41  Turnover with goods in online retail in Germany until 2020 (in € billion)

Direct sales is also used when the manufacturer has its own sales offices or its own shops. This is the case with the Spanish Inditex Group with the brands Massimo Dutti and Zara. In many cases, these brands not only produce themselves, but also sell their products through their own sales outlets. Since these companies combine various stages of the vertical value creation process, they are referred to as vertical suppliers. The process is called verticalization. In this form of distribution, the manufacturer himself decides on the choice of locations where the offers are marketed. This decision has a lasting influence on the supplier’s image and the accessibility of different target groups (cf. Haller, 2017, pp. 131–135). Sales via the Internet, known as e-commerce (derived from “electronic commerce”) or online trading, are becoming increasingly important. This refers to the electronic initiation and processing of purchasing activities. Establishing of online shops is an attractive option for many companies – manufacturers and traditional retailers alike. After all, online retailing has achieved considerable growth since 2000 – and there is no end in sight to this dynamic growth (cf. Fig. 5.41; Statista, 2021b). cc

Memory Box  In 2020, online retail reached a share of 11–12% of the total retail trade in Germany. Forecasts assume that this share could rise to 14.5–19% by 2026 (cf. IBI, 2021).

It is somewhat misleading that direct sales is sometimes also referred to when commercial agents are involved in sales. Commercial agents are legally independent traders and are entrusted with sales tasks for other companies or concluding such business on their behalf. They therefore act on behalf of and for the account of one or more companies. They primarily receive variable remuneration for their services. This is based on the turnover achieved or generally on the achievement of targets.

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Space-bridging function

Time-bridging function

Qualitative assortment function Advisory function

Advertising function

Quantitative

Sales partner

assortment function Credit function Market influencing function

Fig. 5.42  Tasks to be covered in sales

The advantages of direct sales are that the entire distribution management is in the hands of the manufacturer. Consequently, the manufacturer can directly control the entire distribution process. This avoids dependence on sales partners. A disadvantage of direct sales is that there is neither work nor risk sharing between different partners in the sales channel. Therefore, the manufacturing company often has to accept high costs for setting up and maintaining its own sales channels. In addition, tasks that are traditionally performed by sales partners have to be taken on by the company itself. The wide variety of tasks that are part of the sales functions can be seen in Fig. 5.42. Sales partners may perform one or more of the following sales functions: • The space-bridging function is about the task of taking over parts of the physical distribution by transporting the goods. The delivery can either take place close to the customer by supplying the shops in the city center. Or a delivery is made directly to the customer, e.g. by Amazon or Thalia. • The time-bridging function of trade is achieved through warehousing. The necessity for this results from the fact that production and demand are usually not synchronized. For example, a sneaker is produced in size 43 in red in March, but is not sold until May. • The qualitative assortment function of a sales partner consists of putting together an attractive assortment for the target group. If a manufacturer has only a narrow range of products (e.g. only the production of various nails), this often only becomes marketable through the integration into a more comprehensive range by a sales partner. In the case of nails, Obi comes to mind. The store Obi integrates nails into a comprehensive do-it-­yourself assortment. A pure “nail shop” would probably meet with little interest! • The quantitative assortment function of retail is to offer products in quantities that meet demand. Most consumers will probably not want to buy thousands of nails, but 5, 20 or 100. The task of the trade is to offer common sales quantities.

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• Sales partners can also offer an advisory function. The explanation of products – e.g. in the case of household electronics – is often what makes them saleable in the first place. Advice is also provided in the clothing trade and in the do-it-yourself market. • Some sales partners also offer a credit function  – e.g. for cars or larger household appliances (see Sect. 5.1.4). • Finally, sales partners often also exercise an advertising and market influencing function. Supplements and advertisements in the daily newspaper, out-of-home banners in the city, but also a variety of online advertising contribute to this. Here, the sales partners advertise not only for themselves, but also for the products they market. These diverse functions are rewarded by the manufacturers with the function discounts described in Sect. 5.2.4. In the case of direct sales, the manufacturer must dispense with these support services from partners and provide them on his own. The prerequisite for success in direct sales is therefore the manufacturer’s own core competence in sales. At the same time, the potential and attractiveness of the company’s own range of products and services must be so high that it is viable for the company to sell its own products and services. This also requires sufficient financial resources.

5.3.2.2 Indirect Distribution Indirect distribution describes when economically and legally independent bodies come between the manufacturer and the end customer (cf. Fig. 5.40). In this case, one or more legally and economically independent sales intermediaries can be integrated into the sales process. Indirect distribution is used in consumer and industrial goods retailing as well as in the marketing of services. If only one type of sales intermediary is involved, e.g. the retail trade, this is referred to as single-level distribution. In double-level distribution, sales tasks are shifted to two sales intermediaries at the same time, e.g. to wholesalers and retailers. Wholesalers sell products to other companies in their own name and for their own account. These companies include: • Trading companies (from kiosks to flower shops to department stores) • Manufactures (e.g. Bosch or Henkel) • Bulk buyers (such as hotels and restaurants) In contrast to wholesalers, retailers provide their services directly to end users. These can be consumers or companies. Once the manufacturer has selected a particular distribution channel, the question arises as to which concepts or which sales partners are to be used for the selected distribution channel. In some cases, sales agents are assigned to this indirect form of distribution if they act as multi-company representatives and thus as sales assistants for different companies and may offer complementary products. Sales agents provide support in the acquisi-

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tion of new customers and in order processing. They can be found in import and export agencies as well as in insurance agencies. With regard to these sales agents, there are a large number of mixed forms and different characteristics that cannot always be clearly attributed to specific groupings. The integration of OEMs (Original Equipment Manufacturers) also involves a multi-level sales process. On the way to the end customer, another partner is involved here. OEMs are manufacturing companies that purchase products or parts from other manufacturers in order to install them in their own products as original equipment manufacturers (cf. Backhaus & Voeth, 2014, p.  528  f.). Volkswagen is an OEM for Continental tyres when these are fitted to Passat vehicles as original equipment. We can distinguish different operating forms of wholesale and retail. These are also called distribution formats. In the case of wholesale, a distinction is made between the following distribution formats: • Buying and distributing wholesale The task of this kind of wholesale is to bring together goods or raw materials from several suppliers in a first step. This is intended to generate sales-relevant quantities. This form of wholesale is found in agricultural products such as milk, eggs, cocoa, coffee or cotton. In the second step, the products are sold. • Distributing wholesale The task of the distributing wholesaler is to market the goods received to other customers. This can take the form of assortment wholesale. Assortment wholesale features a broad and tends to be rather flat assortment. Specialty wholesale offers a narrow and deep assortment. The different formats of distributing wholesalers are shown in Fig. 5.43. Format

Features

Cash & carry wholeseller

 Self service in store  Direct payment („cash“)  Customer is responsible for transportation from wholeseller to final destination („carry“)

 Metro Cash & Carry  Handelshof Cash & Carry

Delivery wholeseller

 After ordering, goods are delivered to customers  Wholesellers often carry a giant assortment or sell special goods

 Book wholeseller Koehler & Volkmar  Pharmaceutical wholesaler Gehe, Celesio  Rewe wholesale service

Rack-jobber wholeseller

 Wholesellers/producers rent space for racks at other wholesellers or retailers  Wholesellers/producers sell for own account; wwner of the sales floor can take over the cashiering

 Cigarettes  DIY products

Distance wholeseller

 Wholeseller sells the goods  Delivery is made directly to the customer by the manufacturer itself, i.e. without physical involvement of the wholesaler

 Mass produced goods such as steal, coal

Fig. 5.43  Different types of wholesale

Example

5.3 Distribution Policy

327 Retailers

Stationary retailer Department store Specialty store Specialty market Hypermarket Supermarket Discounter Boutique Gas station/kiosk

Non-/semistationary retailer

Online trade/mail order

Weekly market Mobile shop Sales fair Order fair

Universal mail order house Specialty mail order house Teleshopping

Fig. 5.44  Forms of retail

In the retail sector, a distinction must also be made between different formats: • Stationary trade Stationary trade has fixed locations or shop premises. A potential buyer must visit these in order to make purchases. These include department stores, petrol stations and hypermarkets. • Non-stationary or semi-stationary trading Non-stationary or semi-stationary trade includes weekly markets, sales vehicles (e.g. for the supply of bread rolls and fish in the countryside). Sales and order fairs also fall into this category. These include the Hanover Fair and the Frankfurt Book Fair. • Online trade – mail order In online and mail-order trading, buying and selling is done “at a distance”. There is no face-to-face encounter between seller and buyer. The originally separate concepts  – catalogue-based mail order on the one hand and online retail on the other – have now largely merged because an online presence is now the order of the day for every mail order company. Figure 5.44 shows which forms of retail belong to the above categories. The most important retail formats tend to be characterised as shown in Figs. 5.45 and 5.46 (cf. Haller, 2017, pp. 42–47). Due to the large number of different characteristics, the classifications cannot always be made unambiguously. To get an idea of the range of what is meant by product presentation, you only need to visit the textile suppliers Peek & Cloppenburg, C&A, Zara, H&M, Takko, KiK and finally Primark in quick succession. Or visit the food department of the KaDeWe in Berlin once and then go to Aldi. During such a “store check”, the different forms of presentation become clear. While during Advent, the entire KaDeWe is bathed in Christmas spirit, at Aldi you can tell that Christmas is just around the corner just by looking at the range of sweet dominoes and gingerbread (usually from the end of September)!

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Size

Warehouse

 Large sales rooms  From 3000 sqm

 Cross-industry, broad assortment  Ø 100,000 articles  “Everything under one roof”

 Consulting  Different price ranges

 Open presentation of goods  Self-service dominant

City center

Galeria

Specialized warehouse

 Extended sales rooms  1500-3000 sqm

 Deeply structured, industry-homogeneous assortment  No food

 Consulting  Different price ranges

 Open presentation of goods  Self-service dominant

City center

   

 Led by specialists  200-600 sqm

 Narrow, often deep industry assortment  High quality standards

 Advice usually provided by trained sales staff  Supplementary service  More expensive

Inner-city main and suburban locations

 BodyShop  Douglas

 Large sales rooms

 Specialised in certain product groups  Narrow, often deep industry assortment

 Restricted consulting  Claim of price advantage

 Open presentation of goods  Self-service dominant

Usually outside the city areas of large cities

   

 Usually smaller retail shop

 Limited assortment aimed at a special target group  Narrow and flat assortment

 High level of consultation  Higher price level  Frequent change of assortment

 Rarely pure selfservice

Inner-city main and suburban locations

 ModeBoutique  Pandora

Specialist shop

Speciality market

Boutique

Offer

Service/ price level

Presentation Of goods

 Rarely pure selfservice

Location

Examples

H&M P&C Sinn Zara

Bauhaus MediaMarkt Obi Saturn

Fig. 5.45  Formats of stationary retail – I

Due to their highly attractive range of products for broad consumer groups, discounters have managed to continuously expand their market share in recent years (cf. Sect. 4.2.1). One reason why discounters continue to have a dominant share of the total food retail market can be seen in their contribution to complexity reduction, in addition to their high price attractiveness. Through their manageable product range, continuity in appearance, predictability of the price-performance ratio (often even with top results in comparative product tests), security and orientation are conveyed. This applies in particular to Aldi and Lidl. These providers not only save customers economic costs. The reduction to the essentials also reduces the emotional costs. cc

Memory Box  This gives new relevance to an old motto: “Less is more!” 

A specific variant in stationary retail is the shop-in-shop concept. Here, large sales areas (e.g. of department stores) are divided into several sales units. In these, related goods are presented in an appropriate atmosphere. This creates special departments of the respective manufacturers in the sales rooms – exactly a shop within a shop. Suppliers of exclusive goods (such as textiles, leather goods, cosmetics, sporting goods), as well as specialized suppliers of sausages, florists, tobacco products and the like can rent these distribution facilities at their own risk. An example of this is the cosmetics section of the KaDeWe department store in Berlin. These concepts can also be found in branches of Galeria. Online trade or mail order trade (also called distance trade or home shopping) refers to sales formats in which purchases are made “at a distance”, i.e. from “at home” or “from the company”. The classification as mail order is independent of how the offers are presented. This can be done by catalogue, online and/or by tele-shopping. Mail order is also referred to regardless of how the ordering process is done. Orders can be placed by

5.3 Distribution Policy Format

Size

329 Offer

Service/ price level

Presentation of goods

Location

Examples

Consumer market/selfservice center

 800-5000 sqm

 Cross-industry, broad assortment  “Everything under one roof”

 Little consulting  Hardly any service offers  Affordable assortment

 Open presentation of goods  Self-service dominant

Peripheral urban areas

Globus Marktkauf real,-

Supermarket

 From 400 sqm  Up to 800 sqm

 Wider food assortment  Ø 12,000-25,000 items  Supplemented by nonfood items

 Medium to partially low price ranges

 Open presentation of goods  Self-service dominant

Inner city main and suburban locations

Edeka Rewe

Discounter

 400-800 sqm

 Very limited food assortment  Ø 1500-1700 articles  Supplemented by nonfood items and branded items

 No service at the POS  Aggressive lowprice policy  Continuous lowprice strategy

 Simple to simplest presentation  Pure self-service

Downtown suburbs and peripheral urban areas

Speciality discounter

 300-600 sqm

 Industry-specific, narrow assortment  Hardly/no branded products

 Lowest price level

 Simple to simplest presentation  Self-service 278

Downtown suburbs

Aldi Lidl Netto Norma Penny KiK NKD Primark Takko

Fig. 5.46  Formats of stationary retail – II

phone, by letter/postcard, and/or online. Today, however, the term “mail order” is increasingly receding into the background in favour of the more modern term online trade or online shopping, although every online shop is a classic mail order company. Online-only shops are those that exclusively use the online sales channel. However, it can be seen that many online mail order companies now also use offline forms of advertising such as mailings, advertisements, catalogues, catalogue-like publications and newspaper inserts. This applies to Amazon (with classic advertising) and the wine shipper Ebrosia and Zalando. In addition, originally pure online retailers are increasingly opening stationary shops in order to reach further target groups. This approach can be observed at Amazon, mymuesli.de and Zalando. The path to multi- or omni-channel sales is already visible here (see Sect. 5.3.2.4). Based on the breadth of the product range, a distinction must be made between universal and specialist mail order companies. Universal mail order companies (e.g. Amazon, OTTO) have a very wide range of products, from children’s socks to all household utensils to complete home furnishings. The specialist mail order companies have a narrow but deep range of products. Here, providers like Hessnatur (textiles), HAWESKO and ebrosia. de (wines, spirits) or enamora.de (lingerie) come to mind. Product marketing via television is referred to as tele-shopping (derived from television). This is also a pure mail order business with a “TV-supported living catalogue”. In the sales shows, different products are regularly presented to encourage immediate ordering. Tele-shopping is offered here, among other places: • • • •

1-2-3.tv Channel 21 HSE24 (Home Shopping Europe) QVC (QVC stands for Quality, Value and Convenience)

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Tele-shopping is also referred to when offers and/or orders are made by telephone. Indirect distribution has several advantages for a manufacturer. When working with other independent companies, less investment in a distribution channel is required. Finally, the already existing infrastructure of the integrated sales institutions can be used here. This not only reduces the financial risk, but also increases the speed of market access. Depending on the duration of the agreements with the distribution partners, a manufacturer may be able to react more quickly to market changes by changing channels than would be possible with its own sales organization. The dependence on third parties is a disadvantage of indirect sales. In addition, these are often only controllable to a limited extent. At the same time, there is no or only limited access to the end customers. The end customers usually remain anonymous to the manufacturer and are under the sole control of the sales partner. Data about the end customers is difficult to obtain. Therefore, it is difficult to build up relationships with these customers. The tasks that are taken over by third parties must also be remunerated through corresponding functional discounts. These reduce the manufacturers’ profit margin. The success of indirect sales thus stands and falls with the company’s own assertiveness in the sales channel in order to motivate the partners with regard to the marketing of its own services. In addition, the image and performance of the sales institutions involved have an impact on market success. In order to secure greater access to distribution partners, various concepts of vertical marketing systems have been developed. These include (cf. Haller, 2017, p.  431  f.; Meffert et al., 2019, pp. 602–608): • • • •

Sales binding systems Exclusive sales systems Authorised dealer systems Franchise systems

In the case of sales binding systems, there is an individual contractual agreement between the manufacturer and the sales partners. It regulates the sale of goods and imposes certain rights and obligations on the contracting parties (manufacturer, trade partner). These can restrict sales to a defined region (territorial tie). Sales binding systems can restrict sales to certain customers (specialist trade tie, pharmacy tie). In addition, time restraints can be defined by prescribing the distribution time for new or old products as well as for fashionable articles. This enables the manufacturer to focus and control sales to a certain extent. In exclusive sales systems, a manufacturer’s sales programme or part of it is distributed in a defined territory by only one buyer. For each region, one partner is granted exclusive distribution rights and thus enforces exclusive sales. In return, the retailer stocks the complete range of products offered by the manufacturer and takes over service functions. This form of distribution is used for newspapers and magazines as well as for passenger cars.

5.3 Distribution Policy

331

In the context of authorised dealer systems, authorised dealers are independent traders entrusted with the (exclusive) marketing of a manufacturer’s products. This is also referred to as “licensed” or “concessionary” trade. The dealer is obliged to promote sales in accordance with the manufacturer’s concept. The legal structure usually includes sales commitments, including minimum purchase quantities, the obligation to maintain a warehouse, the provision of specific services, the implementation of certain advertising measures and an appearance of the company in the defined corporate design (cf. Sect. 5.4.5.1). In return, territorial protection is often granted. Authorised sales systems are used in automobile sales by Volkswagen and Audi. Such concepts are also used in the distribution of petrol and beer (tied restaurants via beer supply contracts). The possibilities for dealers tied in this way are generally even more limited than in the case of sales binding and exclusive sales systems. The franchise concept involves a very comprehensive contractual relationship between a franchisor and several independent franchisees. The concept is usually based on a specific product or service, a business idea, a brand name or a patent developed by the franchisor (franchise system). The franchisor allows franchisees to use this concept (incl. advertising, services, delivery) for a fee. In addition to an “entry fee”, there are usually sales-related payments. Often the franchisee is obliged to purchase all necessary products and services exclusively from the franchisor. The franchisee acts as an independent entrepreneur and thus at his or her own risk. Consequently, not only does he or she have to raise own financial resources to build up the business, but the profit also depends solely on the success of the franchise company he or she runs. Corresponding concepts can be found in the hotel and restaurant sector, in retail as well as in car rental, travel agencies and fitness centers. Current information is provided by the German Franchise Association (franchiseverband.com). Different variants of franchise concepts can be distinguished. In the case of a manufacturer-­led retail franchise, the system consists of a franchisor and a network of independent retailers. This concept is used by The Body Shop, Obi and Benetton. In a service franchise, the franchisor builds up a network of independent partners. This is done with McDonald’s, Burger King, Sunpoint, Mister Minit, Portas, TUI travel agencies, Hertz and Avis. What are the advantages for the franchisor associated with such a concept? First of all, the expansion of the company can take place without large own investments for the development of distribution channels. The financial means for growth have to be provided by the franchisees themselves. Thus, there is the possibility to use the existing know-how without own financial requirements on a national and/or international level. At the same time, a high rate of expansion can be achieved through the expected commitment of the franchisees. In addition, a high level of motivation can be assumed among franchisees due to their own profit and loss responsibility. Among the advantages for franchisees, the access to a complete and often already repeatedly proven marketing concept (including an attractive brand) should be mentioned first. In some cases, territorial protection is also granted. The participation in the experi-

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ence of the entire franchise concept results in a lower risk for the franchisee, which is, however, “bought” by a longer-term contractual commitment. The critical success factors of franchise concepts are a long-term oriented business model of the franchisor as well as a careful selection of franchisees. Tight franchise controlling must ensure that compliance with the valid standards is guaranteed by continuous quality controls. A scandal at a franchisee can have a negative impact on the entire chain due to the easy recognizability of all franchise companies. The franchisors have the task of strengthening the emotional brand staging overall in order to achieve differentiation in the competitive environment. In addition, they are responsible for supporting the franchise partners in their local branding. The brand presence that can be experienced there has a lasting impact on the perception of the franchise brand. Against this background, internal branding is of central importance in franchise concepts (see Sect. 5.5).

5.3.2.3 Shifts in the Importance of Distribution Channels Overall, it can be seen over the last few years that retail sales have only benefited to a below-average extent from the increase in private demand. The share of retail sales in private consumer spending fell from 38% in 2000 to 32% in 2019 (see Fig.  5.47). Consumers are spending less on retail and more on services of all kinds (e.g. travel; Statista, 2021c). Of the retail sector’s stagnating share of private consumer spending, an ever larger share is simultaneously flowing into online retailing. In conjunction with a relatively stable sales area in the German retail sector, this development is leading to a significant intensification of competition. This opposing development – stable supply of space on the one hand, low sales growth on the other – is reflected in declining sales area productivity. This is determined as follows:

Share of consumer spending

39.0% 38.0% 37.0% 36.0% 35.0% 34.0% 33.0% 32.0% 31.0%

38% 37% 36% 36% 35% 35% 34% 33% 33% 32% 32%

32% 32% 32% 31% 31% 31% 31% 31% 31%

30.0%

Fig. 5.47  Share of retail in private consumer spending in Germany by 2019

5.3 Distribution Policy

333 0

2,000

4,000

6,000

8,000

10,000 9,130

Aldi Süd Lidl (Schwarz Gruppe) Aldi Nord Globus 5,170 5,170 4,930 4,930 4,530 4,600 4,510 4,450 4,450 4,460 4,280 4,250 4,170 4,170 4,150 4,090 4,040 4,050 3,970 4,010

Penny (Rewe Group) Kaufland (Schwarz Gruppe) E-Center (Edeka) famila Nordost (Bartels-Langness) Edeka/E aktiv/E-neukauf Netto (Edeka) real,- (Metro Group) Marktkauf (Edeka) Rewe Center Rewe (Rewe Group)

6,620 6,650 6,120 6,230

7,420 7,400

2019

12,000 10,410

2018

Fig. 5.48  Sales area productivity of the leading food retail sales lines in Germany 2018 and 2019 – gross sales per square metre

Sales area productivity =

Total turnover in stationary retail trade Sales area in stationary retail trade

Figure 5.48 shows how the sales area productivity in grocery retailing in 2018 and 2019. In many distribution formats, space productivity has declined. Not surprisingly, the result shows that the productivity per square meter at Aldi and Lidl continues to be above average (cf. Statista, 2020a). This is due to the discounters’ focus on fast-moving products. Netto and Penny are not as successful here. The distribution ratio is calculated to evaluate the company’s own distribution strength. A distinction is made between two types. The numerical distribution ratio shows the percentage of relevant sales outlets in which the company’s own product range is represented. The level of turnover of the points of sale are not taken into account here. This ratio is calculated as follows: Numerical distribution ratio 

Number of integrated points of sale 100 Number of relevant outlets

Consequently, a numerical distribution rate of 35% for manufacturer A indicates that its product range can be found in 35% of the outlets eligible for marketing. The weighted distribution ratio takes into account the achieved turnover and thus the relevance of the distribution partners involved. This ratio is determined as follows:

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5  Marketing Tools Premium brands

Market leader

Mid-range brands

Higher-value added private labels

Entry-level private label 100% 90%

Market share

80% 70%

24.5%

24.8%

24%

23.9%

24.5%

24.1%

23.1%

22.5%

12.1%

12.4%

12.4%

12.7%

13%

12.9%

13.1%

12.8%

33.9%

33.4%

33.5%

32.9%

32.4%

32.8%

33.3%

33.7%

19.2%

19.1%

19.2%

19.2%

18.8%

18.8%

18.7%

18.9%

10.2%

10.3%

10.8%

11.2%

11.3%

11.4%

11.7%

12.1%

2013

2014

2015

2016

2017

2018

2019

2020

60% 50% 40% 30% 20% 10% 0%

Fig. 5.49  Market shares of manufacturer and private labels in Germany by brand category from 2013 to 2020

Turnover of the integrated sales outlets with the corresponding product Weighted distribution ratio  100 Turnover of all releevant sales outlets with the corresponding product If manufacturer B has a numerical distribution level of 20%, but a weighted distribution level of 52%, then B is represented in fewer shops than manufacturer A.  However, the higher weighted distribution ratio indicates that B is particularly strongly represented in the more important channels, because they generate more sales. Which manufacturer is more successful depends in particular on the intensity of competition within the various sales outlets and thus on the prices achieved. How has the purchasing behaviour of the German population changed with regard to the various brand categories in recent years? Figure 5.49 shows that the share of premium brands alone has increased slightly in recent years. The share of entry-level private label brands has decreased almost continuously. This product category includes the private labels of the discounters (keyword “retail brands”) and the no-name products of the other food retailers. In contrast, the position of mid-range brands is relatively stable, fluctuating slightly by 33%. The higher-value added private labels achieve a market share around 13% (cf. Statista, 2021d). These developments are accompanied by serious challenges for retailers. Innovative concepts are required to raise the profile of retailers in the digital age (cf. Merkle, 2020).

5.3 Distribution Policy

335

Manufacturer Stationary retail shop

Own online shop

Catalogue sale

Sale via platforms

Teleshopping

Customers Fig. 5.50  Basic concept of multi-channel distribution

5.3.2.4 Multi-Channel or Omni-Channel Distribution Multi-channel marketing or, more precisely, multi-channel distribution is when companies do not limit themselves to the use of one distribution channel and/or one type of sales institutions. This concept involves the simultaneous use of different channels and/or sales assistants. Figure 5.50 shows which sales channels can be integrated in parallel. Multi-channel distribution often aims to achieve the following goals (cf. Kreutzer, 2021b, pp. 115–119; Wirtz, 2021; Heinemann, 2021): • Increase in market coverage By integrating several distribution channels, customers with different preferences for shopping locations can be acquired. This enables a higher exploitation of the market potential. • Achieving a balance of risks The simultaneous integration of different sales institutions and/or distribution channels reduces the dependence on individual sales partners or channels. Tchibo consistently implements such multi-channel distribution. This company markets its products directly in its own stores as well as via its own online shop. In addition, Tchibo depots can be found at many other retailers (e.g. Edeka). A classic catalogue is also used to reach additional target groups. The individual sales channels exist relatively unconnected to each other here. Some classic brand manufacturers also pursue multi-channel distribution. In addition to traditional distribution via wholesalers and retailers, they also have their own factory outlets. Such factory outlets are operated by the clothing manufacturers BOSS, Hallhuber and Rosner. There, own products (partly from the previous season or with small defects) are sold “directly from the factory” to end customers. This form of distribution has meanwhile moved far away from the original idea of factory sales. This can be seen in the large number of factory outlet stores. These can now be found independently of the actual production locations. This “decoupling” is due to the fact that fewer companies in the clothing industry are producing in Europe. Nevertheless, manufacturers do not want to give up direct sales to end customers.

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Branded goods companies sometimes also operate their own elaborately designed stores. These are called flagship stores due to their outstanding importance. They represent the company and play a pioneering role in terms of product range and presentation. The brand is to be staged here according to the manufacturer’s ideas and direct customer contact is to be established. The Nivea store already mentioned also belongs to this category. Flagship stores are also operated by Adidas, Lego, Montblanc, Nike, Ritter Sport, Rolex and van Laack, among others. Due to the increasing importance of e-commerce (cf. Fig. 5.41), many stationary retailers have set up their own online shops. An increasing number of manufacturers who previously sold their products mainly via brick-and-mortar retailers are now present on the market with their own online shop (for example BOSS, Esprit, Marc O’Polo, Olymp). Here, online sales are joining the previously established sales channels and are intended to help open up new customer groups or reduce the migration of the company’s own customers to competitors’ online offerings. The following risks of multi-channel distribution need to be considered: • Cannibalisation between different distribution channels Unwanted competition can arise between the integrated (own or external) sales organizations. This is often fought out on the basis of price. In addition, the integration of further sales organizations as well as sales by the manufacturers themselves threaten the market position of the already active sales partners. • Customer uncertainty If identical products are offered to the customer by different channels, this can lead to confusion on the customer side. This risk exists if the channels involved have different image positions and/or service qualities from the customer’s point of view or if large price differences are perceived. • Increase of the coordination effort When multiple partners are involved in sales, the complexity to be managed by manufacturers also increases. It is more difficult to ensure a uniform positioning of the offer. One reason for this is the limited possibility to issue instructions to the integrated sales partners. The control costs increase with each additional partner. Consequently, it must be examined which additional profit or sales can be achieved in each case. cc

Memory Box  The establishment of multi-channel distribution involves a

large number of opportunities and risks for manufacturers and retail companies. These must be carefully weighed up.

Today, companies often rely on omni-channel sales to avoid these risks. Here, the possibilities of the various sales channels are comprehensively coordinated with each other. This is intended to make the customer journey – the “customer’s journey to the ­company” – as simple and convincing as possible. If the individual sales channels are optimally coordinated, the customer has the following options (cf. Heinemann, 2017, pp. 106–129):

5.3 Distribution Policy

337

• Online research before visiting the store (webrooming; web to store); this includes online availability queries. • Buy in store and have it delivered to your home (ship from store). • Reserve/order online and then collect in store (click and reserve or click and collect); here the customers have the certainty that the product is still available when they arrive in the store. • Retrieve further information online from the same provider via mobile device in the retail store (in-store research). • Buy additional items online from the same supplier in the store using a mobile device (in-store ordering) – the keyword here is “virtual product range expansion”. • Buy online and return in the store (return to store); this eliminates the expense of packaging and return shipping. Omni-channel sales strives to offer (potential) customers the desired content or services for each touchpoint. It must be taken into account that users do not expect identical information in the different channels, but they do expect consistent information. cc

Memory Box  The goal of omni-channel sales is to place the (potential) buyer

at the center of all sales activities. For this purpose, the relevant information flows as well as the service offers must be aligned with the respective needs of the buyer.

Food for Thought  Think about what compelling and less compelling multi- or omni-channel concepts you have encountered in the last few weeks.

Ideally, omni-channel sales succeed in tailoring the information and the services in the various phases to the respective target person. This procedure is illustrated in Fig. 5.51. A value-adding link between the online and offline worlds still represents a major challenge for many companies. Often, one still finds a parallelism of activities today. Vouchers can then only be redeemed in the online shop, but not in the stationary store. This forces customers to use one channel, even though the provider operates several channels in parallel. cc

Memory Box  Omni-channel sales strive for “seamless” customer care. The indi-

vidual offers are interlinked in terms of content and optimally exploit the different possibilities of the various channels.

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Blogs

Search

Foren

YouTube Pinterest

Review

YouTube

Compare

Use

Purchase

Pinterest

Apps POS

Receive

Apps

TEA HOUSE

PAY

FREE TEA

Fig. 5.51  Exemplary assignment of channels to the individual phases of a purchase and usage cycle in the omni-channel concept

Food for Thought  Who will prevail in the long term: online or offline sales? Shopping in stationary stores represents a physical and thus above all an emotional experience. Here, there is often also a direct exchange with other people who can support and advise on the selection.  Other people, their looks, their actions, the conversations, the presentation of goods, sounds, scents and the physically available goods can create a shopping atmosphere that cannot be replicated online in the future. It is up to each and every one of us to decide how important brick-and-mortar stores will be in the future. In many of these stores, people act with a lot of heart and soul to give us a compelling sales experience!

5.3.3 Management of Sales Channels and Sales Institutions The decisions that a company has made with regard to market segmentation (cf. Sect. 4.2.2.3) have an effect on the design of the sales channels and the involvement of various sales institutions. If a company pursues a mass market strategy, it must achieve the most comprehensive possible coverage of the market through intensive distribution. For this purpose, sales concepts must be chosen that allow broad market access. In the case of direct sales, such intensive distribution can be achieved by setting up a comprehensive system of sales representatives. If a manufacturer uses multi-level distribu-

5.3 Distribution Policy

339

tion, trade formats with a high distribution density should be selected. Intensive distribution facilitates the development of brand awareness and – due to high product availability – also brand loyalty. In the case of low-priced goods, spontaneous purchases are also promoted because the products are visible “everywhere”. Classic examples of this are snacks and soft drinks. Companies that strive for a premium positioning deliberately rely on focused, partial market development. In this case, selective or exclusive distribution concepts are used. Selective distribution is when only a few sales outlets are to be found in the target market. This is the case with the marketing of luxury watches from Rolex or Lange & Söhne. In the case of exclusive distribution, there is only one point of sale in each market area. The selection of the sales channels and the selection of the sales partners to be involved is based on the criteria defined in Fig. 5.52. Due to the large number of relevant criteria, the selection decision can be supported by the use of scoring models (see Sect. 5.1.2.2). Even after a goal-oriented selection of sales partners, a variety of conflicts can arise in the sales channel. After all, the partners involved often pursue conflicting goals. Figure 5.53 shows the central areas of conflict. The concept of Efficient Consumer Response (ECR) addresses the interfaces between manufacturers, retailers and consumers. This is intended to contribute to overcoming the aforementioned conflicts of objectives. In essence, it is about optimizing the business processes between manufacturers and retailers. ECR is understood as a customer-­

Manufacturer-related influencing factors

 Corporate/marketing strategy; market position of the companies  Company size; financial strength  Product programme and its positioning  Sales competence; own experience with different sales channels

Product-related influencing factors

 Price/quality claim  Need for explanation and service intensity of the offer  Frequency of purchase; frequency of demand  Storage and transport requirements of the products

Competition-related influencing factors

 Number and type of competitors and competing products  Market position and growth rates of competitors´ different distribution channels  Competitive pressure in existing and new distribution channels  Number, purchasing power, purchasing habits and shopping preferences of customers

Customer-related influencing factors

 Spatial distribution/dispersion of customers  Openness or accessibility of customers to different sales channels; image of sales channels  Expectations towards the provider of certain products and services

Sales partners-related influencing factors

    

Product range (width, depth and genre) and product presentation Type, number, availability, image, location/catchment area and target group focus Market position and growth rates of the various sales channels Ability of sales institutions to take over specific tasks (service, consulting, financing) Effectiveness/controllability and costs of outlets

Other influencing factors

   

Legal requirements regarding distribution channels (e.g. pharmacy obligation) Requirements regarding product inaccessibility for certain groups (e.g. alcohol) Values/expectations in the public Technological changes (e.g. strength of e-commerce)

Fig. 5.52  Criteria for the selection of sales channels and sales institutions

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Targets of the manufacturer

Targets of the retail partner

 Profiling of own products and brands (branded products)  National and international product and corporate advertising  Increasing brand loyalty  High distribution density (depending on brand positioning)

 Profiling of the retailer´s shop and assortment  Profiling of retail brands and no-names  POS-focused advertising (often regional or local)  Increase in shop loyalty  Selective or exclusive distribution partially expected

 Continuous flow of product innovations to the retailer

 Marketing in particular of “profitable” innovations of the manufacturers

 Implementation of a trust-building pricing strategy that is oriented towards the objectives of the manufacturer  Reduction of the trade margin as a cost factor of the manufacturer  Cost-neutral shift of functions from the manufacturer to the retailer

 Concentration of marketing on high-profit, target-group-oriented offers  Product placement according to purchase and assortment criteria for yield optimization  Occasionally aggressive pricing policy to increase the attractiveness of the retailer  Increasing the trade margin as a profit driver  Obtaining advertising cost subsidies  Transfer of functions to the manufacturer  Requirement of additional remuneration if tasks of the manufacturer are taken over

 Consistent sales in large quantities  Storage at retailer´s facilities

 Reduction of stock  “Just-in-time” delivery by the manufacturer

 Marketing of the entire range of products  Preferred/exclusive placement of own products in the assortment

Fig. 5.53  Conflicting targets in the sales channel

oriented, holistic view of the process chain from the manufacturer to the retailer and the end customer. The aim is to determine the customer’s wishes as quickly and precisely as possible in order to satisfy them cost-effectively. For this purpose, it is necessary to install a corresponding flow of information that optimizes the flow of goods – oriented to the customer expectations. In order to achieve this, the touchpoints between manufacturers and retailers on the one hand and retailers and customers on the other must be optimized and mapped holistically in terms of data technology. In detail, the following goals of ECR are aimed at (cf. Meffert et al., 2019, pp. 612–618; Bruhn & Hadwich, 2017, p. 378): • Utilisation of cost reduction potentials through optimisation of warehousing • More efficient logistics processes through a continuous flow of information from the retailer to the manufacturer • Increasing sales and raising the level of service to consumers by avoiding delivery bottlenecks, improving adherence to delivery dates and designing a customer-oriented product range. The objectives shown here are targeted by the four central ECR strategies. These are shown in Fig. 5.54. RFID technology can make an important contribution to the implementation of these strategies. RFID stands for Radio Frequency Identification. It is a technology that enables contactless data transfer without visual contact. In this way, goods can be automatically recorded along the process chain from the manufacturer to the retailer and to the customer and important data on relevant success and cost criteria can be obtained.

5.3 Distribution Policy Efficient Product Introduction (EPI) Efficient Assortment (EA) Efficient Promotions (EP) Efficient Replenishment (ERP)

 Objective:

341

Reduction of flop risks (non-successful product launches)

 Implementation: Coordination of product development and market launch between manufacturers and retailers; creation of better testing possibilities and quick response to changes in customer behaviour  Objective:

Optimal use of POS capacities by a demand-oriented design of the shelf area to increase shelf productivity and handling speed  Implementation: Customer-oriented design of the product ranges at the POS i.e. a demand-oriented inventory and shelf optimization  Objective:

Sustainable increase of value added within a product category by stabilizing demand, supported by consistency of trade and consumer promotion  Implementation: Coordination of sales promotion activities between producers and retailers

 Objective:

Time and cost optimization by a demand-oriented design of the supply of goods (avoidance of overor understocking at the different stages of trade, continuous utilization of transport capacities, simplification and acceleration of internal logistics)  Implementation: Comprehensive information flow between manufacturers and retailers as a basis for automated ordering; installation of just-in-time logistics

Fig. 5.54  Strategies of efficient customer response

In the discussion about ECR, the orientation towards customer expectations is often emphasized. However, at its core, it is about optimizing internal processes in order to increase the added value of the companies involved. This is achieved by evaluating purchasing behavior. Simply recording sales figures ignores the motives of customers. Therefore, these figures have to be enriched by information about the “drivers of customer behavior”. The motives thus addressed can – in comparison to rising or falling sales – generally only be determined by means of corresponding surveys. These were presented in Chap. 2.

5.3.4 Distribution Logistics Distribution logistics focuses on the physical distribution of products and services (cf. Schulte, 2016; Voß, 2019). This is also referred to as marketing or distribution logistics. Convincing logistics concepts ideally succeed in achieving the following: • • • • •

The right offers (product or service) is delivered in the required quantity or intensity at the defined location at the requested time and to the desired form.

The challenge for products and services is to simultaneously fulfill these logistics goals and additionally add value to one’s own company. Consequently, logistics costs represent a decisive constraint. In my opinion, setting a target in such a way that the achievement of the defined logistics goals should be associated with minimal costs is not very helpful. After all, the actual achievement of minimality can be disputed as long as the costs are greater than “0”. Even if no costs were incurred, distribution cooperations that would have

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Procurement  Multiple sourcing = bringing together parts from several sources  Global sourcing = bringing together parts from sources that are spread internationally

Production  Incoming quality control  Warehousing  Settlement with suppliers  Assembly  Packing  Outgoing quality control  Settlement with customers  Running an ERP system

Distribution  Delivery of products/ services to defined and agreed-on place, time, in exact quantity, packaging, state, etc.  Establishment of stocks to guarantee delivery times  Establishment of task force to eliminate malfunctions

After-sales services  Consulting when handing over the goods  Maintenance  Training  Delivery of spare parts  Establishment of a customer service center

Taking over of financial functions Taking over of insurance and customs functions Consistent information exchange with customer

Fig. 5.55  Logistics value chain

led to the realization of revenues for logistics tasks might have remained unused. Therefore, only an orientation towards planned costs is appropriate, since these can be specifically controlled (cf. the corresponding explanations in Sect. 3.2). Achieving logistics goals is usually even more challenging when marketing services than products. It is easy to deliver a printed travel guide as a paperback edition to the reception desk of the Ritz-Carlton in Atlanta for Ms. Grogoll on 7/23 at 6:00 pm. In contrast, it is much more challenging to provide the “travel guide” service to Ms. Paschen at the same place and time. Even if the tour guide is there on time, the service cannot be provided if the guest does not show up. Then it remains with a service offer, which is not called. In many cases, the provision of services is tied to the temporal presence of “giver” and “taker”. This is the basis of the “uno-actu” principle already mentioned. The situation is similar for a coaching session, when cutting hair, takting a massage or a popular visit to the dentist. In essence, a specific delivery service is behind the achievement of the aforementioned logistics goals. Logistics service providers are frequently involved for the associated tasks. These often take over the entire logistics value chain (see Fig. 5.55). These service providers include DHL, UPS, DB Schenker and FedEx. The services shown in the logistics value chain can relate to polo shirts from BOSS, the iPhone from Apple, cars from Porsche or the installation and ongoing supply of entire oil rigs in the Pacific. When complex value chains are taken over, the term contract logistics is used. Here, the long-term transfer of logistics tasks is regulated by a contract or an agreement. In this way, the logistics service provider becomes a system supplier – it supplies the entire “logistics system”.

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The integration of such system suppliers is often the result of outsourcing. Outsourcing describes the transfer of services previously provided by internal departments to third-­ party companies. Here, another company takes over responsibility for all or selected tasks of warehousing, transport and, if necessary, other supporting measures: • • • • • • •

Conception of the distribution of goods Number, location and size of stocks to be included Dimensioning the level of stocks Choice of suitable means of transport Choice of transporters to be used Provision of financing services Taking over of customs formalities

cc

Memory Box  In the face of increasing globalization, which requires complex

flows of goods across national and time borders, distribution logistics has become a critical success factor. 

Food for Thought  Research how many kilometres of transport can lie behind a bouquet of flowers. Find out how many parts an iPhone consists of and which countries these parts come from.

cc

Things to Keep

• In distribution policy, a distinction must be made between acquisitive and physical distribution. • Distribution can be single- or multi-level and through one or more channels. • In the case of direct sales, the manufacturer is responsible for the entire distribution. • In indirect sales, various sales intermediaries and/or sales assistants are involved. • Wholesalers and retailers, with their various forms, play a special role in indirect distribution. • Distributors can perform a variety of functions for manufacturers in the distribution process. • Franchise is a sales concept which has proven itself particularly well. • In multi-channel sales, different sales channels are used in parallel. • Omni-channel distribution attempts to optimally align the individual distribution channels with the customer and to leverage synergies in the process. • A variety of criteria are applied in the selection of sales channels and sales institutions. • ECR concepts are used to optimize the interfaces between manufacturers, retailers and consumers. • Distribution logistics plays a central role in the global economy based on the division of labour.

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Questions to Check Your Level of Knowledge

1. Which fields of action does the distribution policy cover? 2. What are the key influencing factors to be considered in distribution policy? 3. What are the differences between direct and indirect sales? What are the advantages and disadvantages associated with these concepts? 4. What are the characteristics of single- and multi-level distribution? What are the advantages and disadvantages associated with these concepts? 5. Which classical tasks are taken over by the trade? 6. What does personal selling mean and in which context is this term used? 7. What is meant by OEM? Give examples of this concept and research more on the Internet. 8. Which retail formats can be distinguished and what forms do they take? Give several examples of each. 9. How can the sales formats discounter, specialist shop and supermarket be distinguished? Give examples of these. 10. What are the differences and similarities between department stores, specialty stores and boutiques? Which companies from these different categories do you know? 11. To which category does e-commerce belong? What is behind it? 12. What is tele-shopping? In which market fields can it be found? 13. What is behind the shop-in-shop concept? Give examples of this approach. 14. What is meant by exclusive distribution? In which areas is this used? 15. What are the objectives of vertical marketing concepts? In which market segments are they used? 16. What is a franchise system? What rights and obligations do the participants of such a system have? What examples are you familiar with? Name the success factors for a franchise system. 17. How are the numerical and the weighted distribution ratio determined? What statements can be made on the basis of these values? 18. Which company tends to have greater sales opportunities: a supplier with a numerical distribution ratio or with a weighted distribution ratio of 30%? What else does the result depend on? 19. What are the conflicting goals in the sales channel? Work out these for different areas and consider how they can be overcome with regard to a constructive cooperation. 20. What is the difference between multi- and omni-channel distribution? 21. What is meant by cannibalization effects between different distribution channels? How can these be avoided by the manufacturer? 22. What is meant by ECR? What are the goals of this concept? 23. What are the different strategies used in ECR? 24. What goals must distribution logistics be geared to? 25. Which stages of the value chain are taken over by logistics service providers? 26. What is contract logistics? 27. What are the different decision-making processes in distribution logistics? 28. What is the importance of distribution logistics today?

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5.4 Communication Policy You can’t not communicate. Paul Watzlawick Learning Objectives

Ability, • to understand the place of communication policy in the marketing diamond • to get to know the objectives, target groups, strategies, instruments and systems of communication policy • to identify factors influencing the design of communication policy • to know different online and offline communication strategies and instruments with regard to their fields of application • to distinguish between advertising material and advertising media • to work on the areas of corporate identity • to develop and evaluate concepts of customer loyalty

5.4.1 Description of the Communication Policy The process of shaping communication policy is illustrated in Fig. 5.56. Derived from the corporate and marketing targets, communication targets are defined for the target groups (cf. Meffert et al., 2019, pp. 634–856; Homburg, 2020, pp. 827–937; Pepels, 2020). For the target group of prospects and customers, these can be monetary goals (such as turnover, sales, profit) and non-monetary goals (such as awareness, image building). With regard to the target group of potential employees, the non-monetary communication goal can be to position the company as an attractive employer. These examples show that the communication object can differ considerably (cf. Fig. 5.56). It is about the object of communication in the sense of “What is to be communicated?” With regard to prospects and customers, this can be the product range or the product programme or specific products and services. In the case of potential employees, the object of communication is the company, a division or a specific job offer. This makes it clear that in addition to the communication object, the communication subject must always be determined (cf. Fig. 5.56). This is about the target group of the communication: “Who is to be addressed?” This can be students, professors, professional women, customers or target customers. Politicians, managers, journalists or bloggers can also represent the target persons of the communication as opinion leaders. The amount of the communication budget must be determined in relation to the target definition. As Fig. 5.56 shows, these individual work steps are comprehensively interlinked. In the course of the communication concept, the first step is to determine the message to be communicated (cf. Fig. 5.56). This has a decisive influence on the media

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Corporate/marketing targets Definition of communication policy targets for different target groups Communication concept

Determiniation of communication budget

Definition of the message to be communicated Selection of communication channels (inter-/intra-media selection) Transforming the message into means of communication for the selected communication channels Determination of frequency of communication

Integration with other communication activities Integration into the marketing diamond

Determination of the timing for communication

Pretest/forecast of communication effects, if applicable Execution Control

Fig. 5.56  Process for designing the communication policy

strategy. This includes the selection of communication channels. In the course of this media selection, the inter- and intra-media selection takes place. In addition, the desired communication pressure and the timing of the communication must be defined. Furthermore, it must be checked how the message should be implemented in communication media (e.g. TV commercials, advertisements, mailings, e-mails, banners, social media posts or YouTube videos). Therefore, all the steps should be taken in close coordination with the definition of the communication content. The following aspects must be taken into account when designing the communication content: • Visual content (e.g. for advertisements, TV spots, mailings, e-mails, posters, banners, apps, corporate websites) • Sound content (e.g. for radio spots, for advertising banners with sound) • Haptic content (e.g. for advertisements and flyers, but also for mailings and catalogues) • Gustatory content (e.g. for samples of food that are included in mailings or offered at the POS) • Olfactory content (e.g. in advertisements with product samples or high-quality mailings with fragrances; fragrances can also be used at the POS, at train stations and in hotels) Actually not a question, but a clear call to action lies in taking the right perspective in communication. Two different perspectives can be distinguished here:

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• Perspective of the sender If a company focuses on the perspective of the sender, then the content that appears relevant from the company’s point of view is transmitted – without clarifying the benefits for the customer. In this case, item selling or feature selling takes place. Primarily technical data and functional advantages of a product are highlighted. In the case of a smartphone, this could be the number of pixels in the camera or the energy consumption of the device. Consequently, only the details of a product or service are communicated here. • Perspective of the recipient If the communication is based on the perspective of the recipient, then the benefits for the buyer are emphasized. Consequently, we can speak of benefit selling here. The central message is the benefit advantages – from the customer’s perspective. The “number of pixels” in a smartphone is then translated into “brilliant picture quality”. The “energy consumption of the device” is translated into “longer usage time without recharging”. In the case of offers, the reasons to buy are consistently based on the achievable benefits – always from the recipient’s point of view. cc

Memory Box  In order to convince customers of an offer, it is imperative to

adopt the recipient’s perspective and to ensure benefit selling in sales conversations. 

Food for Thought  Take a look at advertising messages – online and offline. Which ones are dominated by the perspective of the sender? Where do you find a consistent perspective of the recipient?

Parallel to the selection of the right perspective, coordination with other communication measures must be carried out. This is the only way to achieve an integrated communication. A look at a typical customer journey in Fig. 2.22 shows the challenges of the digital world. Here, it becomes visible which online and offline touchpoints can be included by companies into their communication. However, the touchpoints shown there represent only a small selection of the available options. As already indicated in Sect. 2.2.3.5, the boundary between “online” and “offline” is becoming less important – at least for prospects and customers. Prospects and customers today are “noline” on the move – for them, the categories “online” and “offline” no longer have a dominant significance when searching for information and also when making a purchase. This must be taken into account when developing communication concepts. In addition, the process shown in Fig. 5.56 must ensure a comprehensive integration of the communication measures into the marketing diamond. Intensive coordination is required between all these decision fields in order to create a consistent image in the eyes of the target persons. In addition, the impact of the decisions made on the communication budget must be continuously checked.

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After the communication concept has been developed, a pretest should be carried out before the widespread use (cf. Fig. 5.56). A pretest is a market research tool. Through a test before deployment in the market – hence “pre” for “before” – the expected effects of planned marketing measures can be determined in a test environment. Depending on the results of the pretest, the communication can either be optimised  – or it can be used unchanged. After the test has been carried out, a comprehensive performance review should be planned in order to identify where there is a need for optimisation. So far, we have only spoken of communication in general terms. The process defined in Fig. 5.56 can be used for the various communication measures. Communication is understood in marketing as the transmission of information to different target groups through the use of specific instruments, media and/or systems to achieve specific goals (cf. Fig. 5.57). The following decision fields of communication are to be distinguished: • The content or information to be conveyed through communication can be the degree of novelty, the quality or the pricing of the offers. The available sources of supply, specific guarantees or the entrepreneurial commitment in the Third World can also be made known. • In communication policy, target groups are broadly defined and can include all groups mentioned in the presentation of the stakeholder approach in Sect. 1.1.1 (cf. Fig. 5.60). • Communication policy can make use of a variety of instruments. The instruments range from PR (public relations) to advertising, sales promotion, sponsoring and social media engagement.

Targets

Content

Target groups

Communication policy

Instruments

Fig. 5.57  Decision fields of communication policy

Systems

Media

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• Different media can be used in this regard. Billboards, TV, radio, mailings as well as the various online media such as websites, online banners, keyword ads, social media posts and social media ads come to mind. • The combination of content, target group, medium and instrument to be used in each case depends on the communication objectives. • Communication systems bring together different elements of communication policy. This is the case with complex campaigns, but also with customer loyalty systems and the concept of corporate identity. Communication is essentially about the process shown in Fig. 5.58. The sphere of the sender describes the sphere of influence of a communicating company. This sphere includes defining the communication objectives. Based on these, a briefing for the design of the communication activities must be developed. This briefing is the basis for the work of the service providers. The tasks in the sphere of the service providers include the encoding (encryption) of the communicative specifications into a language of words, images and/or sounds and their conversion in advertisements, banners, commercials etc. (cf. Fig. 5.58). Other service providers are responsible for conveying the messages. These include creative and media agencies, publishers, TV and radio stations as well as online platforms such as Facebook, Instagram, Google, TikTok and YouTube. In the sphere of the receiver belongs first the receiving and thus the perception of the communication (cf. Fig.  5.58). This perception is followed by decoding (decryption). Decoding and processing of the transmitted content are the prerequisite for the recipient to react – ideally in the sense of the sender (here the seller). cc

Memory Box  We only have a very limited influence on how communicative

content is actually perceived by the recipient.

Communication policy, and advertising in particular, occupies an important position in marketing because of its special visibility. However, a linguistic differentiation between advertising, communication and marketing is indispensable. Set theory allows us to prop-

Sender´s sphere

Definition of communication targets

Service providers´ sphere

Creation of a briefing

Fig. 5.58  Communication process

Encoding

Transfering

Receiver´s sphere

Reception and decoding

Processing and reaction

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Marketing Communication policy

Personnel policy

Distribution policy

Advertising Product and programme policy

Price and conditions policy

Fig. 5.59  Delimitation of marketing, communication and advertising

erly identify these relationships (cf. Fig. 5.59). All marketing instruments are subsets of the superset “marketing”. “Advertising” in turn is a subset of the subset “communication policy”. cc

Memory Box  Only speak of “marketing” when you mean marketing as a “management concept” or marketing as a comprehensive “function in the company”. Use the term “communication” when you want to talk about the different communication concepts. Use the term “advertising” when talking about commercial communication.

The various elements of communication policy are closely interwoven. In order to ensure a comprehensible introduction to this area, it is nevertheless necessary to break it down into different aspects of communication.

5.4.2 Targets, Target Groups and Information Fields of Communication Policy All communication policy targets can be traced back to three core targets: • Information targets Corporate communication is intended to convey specific information about the company, its culture and values, its range of services, its position in the market, etc. to a wide variety of target groups. Making the company and/or its products/services known is at the top of the list of information targets. • Influence targets The provision of information is not an end in itself. It serves the achievement of overriding goals. For example, communication is intended to create a certain image of the company in the eyes of the public, investors, potential cooperation partners, (potential) employees or prospects and customers. Communication policy is used with the aim of influencing the perception and evaluation of a company and its offers by third parties. This is intended to shape their attitude towards the company, its offers and employees in a certain direction and consequently to build up a certain image.

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• Steering targets This influence is goal-oriented. Changing attitudes should also guide specific behaviors. For example, particularly qualified graduates should apply at a certain company (keyword “employer branding”; cf. Sect. 5.5.2.3). In addition, interesting cooperation partners should be encouraged to make contact. Above all, however, companies want to achieve that the products and services offered are in demand. Here, a certain behaviour is to be forced. This can be reflected in the search for information, initial and repeat purchases as well as in recommendations. The targets mentioned can be assigned to the various phases of the customer relationship life cycle in Fig. 4.12. The intended communication goals can be summarized strikingly with the so-called AIDA formula. The following goals are hidden behind this acronym: • Attention: Gaining the attention of the subjects of communication, i.e. the target persons. • Interest: Arouses interest in the communication object. • Desire: Triggering a desire to own the communication object or – via a donation – to do something good. • Action: Triggering a purchase, a donation, or an application for a membership. This formula should be extended by two steps to AISDAS in view of the increasing importance of the online sector. In this sequence, the additional letters S stand for: • Search: Execution of (online) search processes • Share: Sharing (positive) experiences with others before, during and after the buying process The content of the communication targets depends, among other things, on the position of the company and its offerings in the market. The intensity of competition also has an impact on the required communication measures. The content to be conveyed by corporate communications is also influenced by the public image of the company’s own industry. The image and PR campaigns of companies from the automotive, chemical, power generation, fast food, pharmaceutical and textile industries come to mind here. The communication objectives are also influenced by the phase in the life cycle in which the products and services are located. As Fig. 5.60 shows, prospects and customers are only one – albeit a very important – target group of corporate communication. Corporate communication focuses on three target groups: • Target customers that a company wants to win over. • Prospects, i.e. persons who have already shown a general interest in the services and have submitted contact details. This expression of interest can take place by requesting a catalogue or an offer. Subscribing to a newsletter also signals an interest in the products and services offered. Companies can already enter into a dialogue with the prospects on the basis of the contact data. • Current customers should continue to be served after the purchase. In addition, former customers are to be won back.

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General public

Political decision-makers

Investors

• Target customers • Prospects • Customers

Cooperation partners

Service providers

Employees

Fig. 5.60  Target groups of corporate communication

Target customers as well as existing prospects and customers can be either consumers (B2C) or contacts in companies (B2B). When addressing these people, a distinction must be made between the push and pull strategy. Here, it is a question of which communicative (often purely advertising) focus a company would like to set in the sales channel. In the push strategy, a manufacturer tries to push its products into the sales channel. This is illustrated by (1) in Fig. 5.61. This pushing can be done by monetary incentives. These are designed to motivate trading partners to list the products. In parallel, displays can be used to increase the visibility of the offers. These measures are carried out under the premise that retailers will already actively promote the sale of the products when they first have them in their assortment (2). This motivates the target customers to buy the products. We speak of a pull strategy when the customer (consumer or company) is wooed by the manufacturer itself with the aim (3 in Fig. 5.61) of getting the customer to approach the retailer and “pull” the offers out of the sales channel (4). Since the trade is skipped, the pull strategy is also called jump advertising. In the push and pull strategy, further price and/or product policy instruments can be used in addition to communication activities (including PR, advertising, sales promotion). These include special discounts for retailers or couponing campaigns for customers (cf. Sect. 5.2). The large brand manufacturers use both the pull and the push strategy. Other manufacturers do without the usually very cost-intensive pull strategy. These companies concentrate on retailers as direct customers with a push strategy. Food for Thought  The next time you visit a major grocery store, check to see which brands you’ve never seen advertised. These companies probably rely solely on the pull strategy!

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1

353

Push strategy

Pull strategy

Manufacturer

Manufacturer

Retailer

2

Retailer

4

Target customer (BtC, BtB)

Target customer (BtC, BtB)

3

Fig. 5.61  Push and pull strategy Total audience (from 3 years)

14 to 49 years

16% 14%

13.8% 11.3%

Audience share

12%

10.6% 9.3%

10% 8% 6%

6.4%

6.9%

7.7%

7% 5.2%

6.8% 4.7%

4%

4.1%

3.5%

4.6%

4.6% 2.6%

2% 0%

ZDF

Das Erste

RTL

Sat.1

Vox

ProSieben Kabel Eins

RTLzwei

Fig. 5.62  Audience market shares of TV channels in Germany in April 2021

In the context of online marketing, the terms “push” and “pull” have a different meaning. Pull communication is when a target person “pulls” the desired information from the Internet. This is achieved through the use of search engines, the use of content marketing, clicking on keyword ads, as well as visits of company or price comparison websites. Engagement in blogs and online communities can also be understood as a specific way of obtaining information and as an expression of this pull communication. Push communication includes the online activities of companies that actively deliver information to users. This includes SMS messages, e-mails and e-newsletters as well as banner advertisements. These messages are usually delivered to the recipients unintentionally. This is why the term push messages or push notifications is used (cf. Kreutzer, 2021b, p. 116). In my opinion, the following fact represents an anachronism (in the sense of a phenomenon that has become obsolete due to the passage of time): In Germany, until a few years ago, the advertising-relevant target group, for which, for example, the advertising block ratings of the TV stations are shown, was mainly defined in the age group 14–49 years. Figure 5.62 shows that this classification is still relevant today (cf. Statista, 2021e). Here, the market shares are also shown for the age group 14–49!

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The part of the population that today has more than 50% of the freely disposable income is thus defined, by implication, as “advertising irrelevant”. This classification was  – as Helmut Thoma (2009) freely admits – “… a purely tactical invention to distinguish RTL from the public broadcasters. As is well known, the ‘advertising-relevant target group’ I have defined in this way includes all viewers between the ages of 14 and 49, although I wrestled with myself for a long time as to whether the upper limit should not be 39 or 59. In the latter case, however, too many viewers of ARD and ZDF would have been in this group. And 14 to 39, that would have simply comprised too few people overall. Actually, I did away with the middle age through this target group, because whoever exceeds 49 goes directly from youth to senior status.” It is interesting that even decades after this definition, for many companies, for advertising and media agencies, the advertising-relevant and thus also the buying-relevant life stops at 49  years of age. However, a rethinking has begun in the meantime, which has already led to a partial redefinition of the “advertising relevance of target groups”. The general public and political decision-makers are further target groups (cf. Fig. 5.60). The aim here is, for example, to inform the public about specific projects (e.g., for vaccination campaigns) or to influence legislative procedures. A company that is “badly perceived” by the public or by political decision-makers  – whether justified or not – will often find it more difficult to achieve its corporate goals than one that knows how to sell itself well in both directions. This applies equally to the sale of genetically modified or genetically manipulated seeds, the construction of wind turbines, the expansion of airports and the obtaining of government financial aid. Existing and future investors are also target groups of corporate communication (cf. Fig. 5.60). These can be either financing banks or shareholders. In addition to institutional investors, these can also be the increasingly courted retail investors. Without appropriate networks and a positive assessment among potential investors, an IPO will be more difficult to implement. In the case of cooperation partners as a target group for corporate communication, the range is extended from advertising partnerships to strategic cooperations and franchise systems. In the case of cooperations, Star Alliance, One World and Sky Team in aviation come to mind. Partners with whom joint research projects are being implemented or are planned also belong to this target group. Here, too, it is important to establish or support sustainable relationships through communication. Which service providers are to be included in the communication depends on the respective company. As a manufacturing company, the sales partners (sales intermediaries and sales assistants) described in Sect. 5.3 can represent an important target group. These partners must be integrated into the sales process, provided with information and controlled in order to manage and actively market the offers. Service providers of sales logistics are not only courier services, but also financial institutions that provide sales financing. Advertising and event agencies, personnel service providers, online service providers and media agencies also belong to the group of service providers. Consultants also represent an important target group for communication in the B2B market.

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In addition, it is imperative that the company’s own employees also represent a core target group for communication. The reasons for this are discussed in more detail in Sect. 5.5. cc

Memory Box  With all these target groups, it is important to build stable

relationships, because in the increasingly networked economy, it is more true than ever: Noone is an island!

Every company depends on the cooperation with third parties. After all, a lone wolf appearance will usually not yield the desired success. It is necessary and helpful to maintain the networks not only with regard to current partners. The networks must also be kept open to potential partners. These can be employees, financiers or cooperation partners. For the totality of these activities – as in the private environment – the term networking has become common. Networking describes the long-term development and maintenance of a network of relationships with a larger number of relevant individuals (especially opinion leaders and opinion makers) and companies that can be accessed to achieve a wide variety of goals. What can a company inform about? The following categories of information can be distinguished here: • Range of products/services in the narrower sense • Public commitment • Internal commitment The focus of corporate communication is the range of products/services in the narrower sense. This is the core of a company. In the case of an Audi car dealer, this can be the purchase and sale of new and used cars, financing and leasing of vehicles as well as repair and other services. The start-up tcl.digital offers solutions to increase text performance under the slogan “Understandability is good – Performance is better” (cf. TCL, 2021). In the case of a fundraising organization such as Greenpeace (2021), the performance core is presented as follows: “Greenpeace is an international environmental organization that uses direct non-violent action to fight for the protection of the natural foundations of human and natural life and justice for all living things.” cc

Memory Box  The communication.

respective

fields

of

activity

dominate

corporate

At the same time, it is important to highlight the company’s public commitment. The aim is to build up a positive public image. This can be projects such as the Beethoven Festival in Bonn, for which the companies Deutsche Post DHL, Deutsche Telekom, Deutsche Welle and Sparkasse KölnBonn are involved as main sponsors. In this way, com-

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panies document that they are prepared to take on responsibility beyond their business activities and support important tasks for society (cf. on sponsorship Sect. 5.4.3.7). These issues are discussed today under the term CSR, which has already been presented. The internal commitment of the company can also be part of the internal and external communication. It is about the provision of apprenticeships, the further qualification of employees or particularly extensive social benefits that companies grant their employees. Such benefits can motivate potential employees to apply to the company in question. In addition, customers may also feel attracted by such a commitment. When making a purchase, customers then have a “good feeling” because they themselves are buying from a “good company”.

5.4.3 Instruments and Media of Communication Policy 5.4.3.1 Overarching Concepts of Communication Policy In communication policy, a distinction is made between advertising material and advertising media. • Advertising media transport or “carry” various advertising materials to the target persons. Advertising media include TV, radio, newspapers/magazines, online platforms, cinema and outdoor advertising. • Advertising material “conveys” the advertising message. Advertising materials include radio spots, advertisements, inserts, e-mails, social media posts and advertising banners. Figure 5.63 shows an excerpt of the advertising possibilities offered by the various advertising media today. There are primarily budgetary and legal limits to creativity here. The advertising material to be found here are explained in more detail in the following sections. cc

Memory Box  When the terms “advertising medium” and “advertising material” are applied, this does not mean that they can only be used for advertising. The same media and materials are also used for PR and sales promotion.

The importance of the individual advertising media is shown in Fig.  5.64. From January to March 2021, TV achieved a market share of 46.4% of gross advertising revenues in Germany (cf. Statista, 2021f). This means that TV continues to dominate the advertising market. Newspapers achieved a market share of 14.9% in this period. Online advertising follows in third place, with 12.8%. Consumer magazines are in fourth place with 8.3% – followed by advertising mail with 7.3%. Out-of-home is at 5.6%, followed by radio at 4.6%. The cinema market share of 0% is due to the pandemic-related closure of cinemas in Q1 2021. How have advertising revenues developed in absolute terms? In the first quarter of 2021, gross advertising revenues in Germany amounted to around € 7.58 billion.

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Advertising media

Advertising material

Classical TV commercial

Direct response TV spot (contains a callto-action)

Special ad (link program and advertising)

Title, programme sponsoring

Ad break specials

Classical radio commercial

Direct response radio spot (contains a callto-action)

Live reader (read by a member of the editorial team)

Title, programme sponsoring

Content spot (two-part spot, interrupted by content)

Monolog ad

Direct response advertisement

Advertisement with product sample

Insert

Sponsoring advertisement

Internet

Banner ad

Keyword advertising

Social media ad

Paid post, paid tweet, paid pin

E-mail E-newsletter

Cinema

Classic cinema spot (screen advertising)

Promotion in the foyer of the cinema (producttasting)

Mirror stickers in the sanitary facilities

Door and floor poster

Sampling on the cinema seats

Classic poster, advertising pillar, mega light

Digital Out-ofHome (OOH), digital outdoor advertising

Event media with promotion team

POS advertising (display, e.g. secondary placement)

Ambient advertising (ads on means of transport, etc.)

TV

Radio

Newspaper/ magazine

Outdoor advertising

Fig. 5.63  Selected advertising media and advertising materials 0%

5%

10%

15%

20%

25%

30%

35%

Television

45%

50% 46.4%

Newsletters

14.9%

Online

12.8%

Magazines

8.3%

Advertising mail

7.3%

Out-of-Home

5.6%

Radio Cinema

40%

4.6% 0% 0

Fig. 5.64  Market shares of media types in the gross advertising market 2021

Investments in TV advertising amounted to around € 3.52 billion. Newspaper advertising followed with around € 1.13 billion. Online advertising generated around € 970.5 billion. The gross advertising volume for the entire year 2020 in Germany was around € 34.32 billion (cf. Statista, 2021f). How have the market shares of the various media types developed? TV has also been able to significantly expand its dominant market share of gross advertising investment in the online age. Between the years 2011 and 2019, the share of TV advertising increased by

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almost 4% to around 46.6%. In the same period, newspapers and magazines have lost significant market share (cf. Statista, 2021f). Companies are faced with the question of which media their advertising should be placed in. Media selection in the context of media planning has the task of selecting suitable advertising media and advertising materials. These should have the greatest chance of being noticed by the target persons in order to achieve the defined advertising objectives. The starting point for media planning is the objective, target group and budget. When developing a communication strategy in the course of media planning, a three-stage selection process must be run through: • Inter-media selection The first thing to decide is which advertising media to use. This is the inter-media selection. The question here is whether TV, online platforms or print media should be integrated into a campaign. • Intra-media selection After deciding on a media category, it must be determined which media are to be integrated within this category. This is called intra-media selection. If a company relies on TV, then it must be decided here whether a spot should run on ARD, ZDF, RTL or Sat1. If a company relies on a social media campaign, then it must be checked whether Facebook, Instagram, TikTok, LinkedIn or Xing are the suitable platforms. • Intra-advertising material selection per advertising medium Figure 5.63 shows that when a decision is made in favour of an advertising medium, the appropriate advertising material must then be selected. This is the content of the intra-­ advertising selection per advertising medium. When deciding on the Facebook platform, the question arises as to whether Facebook ads or sponsored posts should be used. These three selection stages of media planning are interlinked. That is why the selection process involves a variety of coordination rounds. Inter-media selection and intra-media selection are concerned with the question of which media category or which specific medium is best suited to achieving a particular communication goal under certain budgetary restrictions. The following criteria can be used for these selection processes (cf. Kroeber-Riel & Gröppel-Klein, 2019, pp. 712–723): • Image and credibility of the medium (editorial and advertising environment) The image or credibility of the medium is of central importance for the placement of communicative messages. These are shaped, among other things, by the editorial focus, the type of information processing and the associated communicative environment. Depending on the environment in which a message is placed, it will be received and evaluated differently in terms of credibility, trust, seriousness, etc. Thus, advertisers necessarily ask themselves whether their message can best and most credibly be communicated via Bild, TAZ or the Frankfurter Allgemeine Zeitung. It is difficult to imagine the party CDU placing an ad in SUPERIllu to recruit members. An ad for Lange & Söhne watches can be found regularly in the Frankfurter Allgemeine Zeitung, but not in Bild.

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In sum, the image and credibility criterion is about media affinity for the advertising company and the recipient alike. • Primary function for the user What value does a particular medium have for the user? Is a medium used more for entertainment? Or is it used as a guide or to obtain trustworthy information? • Usage situation In addition, the primary usage situation must be taken into account. Is the medium used more actively? This is the case with Internet research, but also with reading newspapers and magazines. In contrast, radio is often used as a background medium for other activities. Even during TV consumption, parallel use of the so-called second and third screen takes place in many cases today. Second and third screen stand for smartphone and tablet, which are often used in addition to TV. There is also the question of whether use takes place in a private or business environment. The different usage environment affects the advertising effect. The characteristics described determine the media quality to be considered in media planning. • Media update rhythm For many campaigns, the question of what communication pressure can be built up by a medium is decisive. In the case of online advertising as well as TV and radio channels, messages can be transmitted 24 hours a day, 7 days a week. In the case of magazines, the publication frequency (weekly, monthly, quarterly) limits the reach and thus also the possible advertising pressure. When using non-digital large surfaces (out-of-­ home media), minimum run times of 10 or 11 days must often be taken into account. Here, no quick updates of messages can be made. The different frequency of media also has an impact on whether time-limited messages (e.g. special tariffs) can be advertised in such a medium. • Media availability What time or legal restrictions exist on media use? At what times can TV advertising be broadcast? There are major differences here between public and private broadcasters. On online platforms, advertising is possible 24/7. What advertising bans exist in certain media? These include the ban on advertising cigarettes on television and the ban on advertising prescription drugs in the general media. • Media bandwidth Which senses can be addressed by a medium and in what way? Radio can only convey auditory stimuli through sound. Television and online media use visual stimuli in addition to auditory stimuli. These visual stimuli can be conveyed as text as well as still and moving images. Print media convey haptic stimuli  – through touch  – in addition to visual stimuli through paper. When using samples (product samples, e.g. of creams and perfumes), olfactory stimuli can even be conveyed in the print media through smell. Gustatory stimuli (taste) are triggered by tasting.

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The criteria media update rhythm, media availability and media bandwidth together make up the media flexibility. • Quantitative reach (global reach) What number of people can be reached via a particular medium? This quantitative reach is independent of whether the people reached actually belong to the intended target group. • Qualitative reach (target group specific reach) What number of people are reached who belong to the intended target group? In the B2C market, this target group can be defined based on criteria such as purchasing power, level of education, marital status, age and social class. In the B2B market, the target groups can be defined depending on company size, legal form, industry, etc. With regard to qualitative reach, the question arises as to how well it is possible to address specific target groups via individual media. Very different target groups can be reached via the print media Bild, Frankfurter Allgemeine Zeitung, Handelsblatt, Manager Magazin, Der Spiegel, Süddeutsche Zeitung and Die Zeit. A very specific target group selection is possible via the advertising tools of Facebook, Google, LinkedIn, Xing & Co. • Spatial range (spatial focus) Which area can be covered by a medium? Does a regional coverage dominate, such as the local newspaper Die Harke from Nienburg? Or is there a global distribution as with the Financial Times or CNN? Is it possible for the advertiser to cover only parts of the catchment area of these media? Regional windows in print titles as well as radio and TV advertising should be considered here. Ads in online media can also be played out regionally. With regard to these characteristics, we speak of media reach. • Production costs How much does it cost to create the corresponding advertising medium? The cost differences between a TV spot compared to an advertisement or an advertising banner are serious. • Costs to place an advertisement What are the absolute costs for placing the advertisement? How much must be paid to reach 1000 people? Here we talk about the so-called price per thousand. Is there a possibility that the user will come into contact with the advertising medium several times even with a simple placement? This is the case with an advertisement in a newspaper or magazine if it is picked up repeatedly. The probability of such multiple contact is much higher with a weekly or monthly magazine than with a daily newspaper. This is because with the daily newspaper, the motto is “Nothing is as old as yesterday’s newspaper!” A billboard advertisement can also be perceived multiple times. Multiple contact is not possible for a cinema spot that has been shown once or for a TV or radio spot that has been broadcast once. Unless a TV or radio broadcast has been recorded. A user can only come into contact with an advertising banner on the Internet several times if it is played repeatedly.

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The reach of the medium in conjunction with the placing and production costs determine the media economics. In order to determine the media economy, the contact chance of an advertising medium must first be calculated. The advertising medium contact chance describes the probability that people will come into contact with the advertising medium. Here we can think of the advertising medium Der Spiegel. However, not every advertising medium contact also leads to an advertising medium contact. After all, not all people who pick up an issue of Der Spiegel actually look at every page there. Newspapers are not necessarily read from the first to the last page either. Even a TV user does not have to have seen an advertising block in its entirety, even if he or she follows the programme in which this advertising block is included. The advertising media contact chance characterises the probability that the user will come into contact with an advertising medium that has been placed. This can be an ad, an insert, an online banner, a social media ad or a TV or radio spot. How should one compare the media economics of different offers? The so-called cost per thousand or thousand-contact price is used to compare different media categories and different advertising materials. In online marketing, this is referred to as cost per mille (CPM). The cost per thousand serves as a benchmark for the profitability of a medium. Here, the costs of the placement are set in relation to the number of advertising medium contacts (i.e. the reach). The cost per thousand is calculated as follows: Cost per thousand 

Costs of placing the ad 1000 Number of advertising media contacts  reach 

The cost per thousand for a publisher’s website is to be determined. This website is accessed two million times a month. The price for the advertising placement is € 15,000 per month. The CPM in this case is € 7.50. In order to reach 1000 people via this website, a company must therefore pay € 7.50. The placing costs taken into account here do not include the production costs of the advertising medium itself (ad, TV/radio spot, online banner, etc.). The placing costs only include the expenses associated with the occupancy of a medium. The number of advertising medium contacts refers either to the gross reach or to the net reach of the medium. If the cost per thousand is determined for the gross reach of a medium, then multiple contacts of a person with the identical advertising medium are also counted. The cost per thousand (gross) is then calculated as follows:



Cost per thousand  gross  

Costs of placing the ad 10000 Gross reach

To determine the cost per thousand for the net reach of a medium, the multiple contacts of a person with the identical advertising medium are deducted. The cost per thousand (net) is then calculated as follows:

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Cost per thousand  net  

Costs of placing the ad 1000 Net range

The cost per thousand for the net reach is also called cost for thousand readers (for newspapers, magazine), cost for thousand listeners (for radio) or cost for thousand viewers (for TV and online channels). In many cases, the consideration of the quantitative reach is not enough. In order to take the qualitative reach into account, a media selection is usually made on the basis of the cost for reaching thousand members of the target group. Here, the percentage share of the target group in the total audience reached is taken into account. The amount calculated as follows:



Cost for reaching thousand members of the target group Costs of placing the ad   10000  Reach Percentage of target groups%

This price per thousand is now to be determined for the website of the publisher already mentioned. It is assumed that of the two million page impressions, only 50% are attributable to people in the target group. The price for the advertising placement is still € 15,000 per month. The CPM in this case is € 15, as only one million of the two million page impressions are attributable to the company’s own target group. In order to reach 1000 people in the target group via this website, a company must therefore pay € 15. cc

Memory Box  While the cost for reaching thousand members of the target

group at least takes into account the media user quality, this criterion does not take media quality, media flexibility or the advertising media contact opportunity into account.

Based on these and many other criteria, a distribution plan for advertising can be created. This shows the distribution of the individual advertising measures of a campaign depending on the time, period and switching frequency with regard to the advertising media used. In the distribution plan, a distinction is often made between a basic medium and flanking media or additional media. The main focus of communication is on the basic medium. In the accompanying media or in the additional media, significantly less budget is used. When developing the distribution plan, the effects of the individual advertising media are evaluated in terms of the number of people reached and the quality of the contact. The expected combined effects of various advertising media and advertising materials are also taken into account. A distinction is also made here between the number of gross contacts (also gross reach) and the number of net contacts (net reach). Gross impressions are calculated by adding up the individual reach of several issues or several booking units of one or different advertising media. If title A reaches three million

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readers and title B five million readers, the total is a gross reach of eight million contacts. If a medium is booked more than once or several media are booked, the achieved reach is added without taking overlaps into account. A distinction must be made between internal and external overlaps when adding the reach. • Internal overlaps occur when a target person sees the same advertising medium more than once. This can be an ad in Stern or an online banner on a publisher’s website on the Internet. • An external overlap occurs when a target person is reached by an advertisement in different magazines. This would be the identical ad in Stern and Focus. Or an identical online banner on the website of Der Spiegel and Handelsblatt. The number of average contacts per target person is also an important criterion when designing the distribution plans. Due to the internal or external overlaps, it is not possible to read off how many people were reached in total when adding up the reach of different measures. In order to determine the total number of people reached, the multiple contacts must be deducted. To determine the net number of contacts, the internal and external overlaps are therefore eliminated. Net reach then tells you how many people were reached at least once by the advertising. Each person is therefore only counted once in the net reach – regardless of the number of actual contacts. With regard to the temporal use of the media, various strategies can be employed. These are shown here using the example of a TV campaign. The choice of the “right” advertising strategy depends on the campaign objective. Should brand awareness be built up, the image improved and/or sales promoted? The media budget also has a significant influence on the strategy that can be financed. For smaller budgets and the marketing of seasonal products, the flighting strategy is often used. With flighting, on-air phases alternate with off-air phases. This enables advertising visibility throughout the entire campaign period (cf. Fig. 5.65). The pulsing strategy is based on continuous advertising pressure. In addition, several flights with high advertising pressure can be booked. Here, phases with high and low advertising pressure alternate constantly. These strategies both lead to a pulsing media presence. The recency strategy and the continuous strategy ensure continuous advertising on TV.  These strategies require a larger media budget and are well suited to sustainably increase brand awareness or to secure it at a high level. The recency strategy builds up continuous advertising pressure at a comparatively lower level. The continuous strategy also ensures a lasting advertising pressure – but at a higher level (cf. Fig. 5.65). In both cases, a continuous media presence is achieved over the entire advertising period of a campaign. With the frontloading strategy, the maximum advertising pressure decreases continuously after the start of the campaign. Such a concentrated media presence is ideal for a new product launch or in the run-up to an IPO. With the backloading strategy it is the other

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Communication budget in mio. € 10 9 8 7

Flighting: pulsing media presence with strong focal points and breaks Continuous: continous media presence

6 5

Recency: continous media presence with breaks Pulsing: : pulsing media presence with individual focal points

4 3 2 1 0

I.

II.

III.

Quarter

IV.

Fig. 5.65  Patterns of communication strategies – example television – I

Communication budget in mio. € Frontloading: media presence decreases continuously

10 9 8

Backloading: media presence increases continuously

7 6 5 4 3 2

1 0

I.

II.

III.

IV.

Quarter

Fig. 5.66  Patterns of communication strategies – example television – II

way round. Here, the advertising pressure increases continuously until the end of the ­campaign. This strategy is suitable for offers that will end at a certain point in time (cf. Fig. 5.66). cc

Memory Box  Which of the communication strategies is the “best” can only be

decided against the background of the specific communication goals in the respective context. Various impact hypotheses flow into the decision. These must be documented in order to check whether or not the hypotheses have been confirmed after the campaigns have been completed.

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Various institutions provide important information for media planning (see also Ivanova & Gawenda, 2021). The most important institutions are presented here. • IVW (Informationsgemeinschaft zur Feststellung der Verbreitung von Werbeträgern; cf. IVW, 2021) IVW is a governmentally independent, non-commercial and neutral testing institution for the German advertising market. The activities of the IVW are under the supervision of media providers, media and advertising agencies as well as advertisers. The companies meet on the market as sellers, intermediaries and buyers of advertising media services. IVW pursues the goal of promoting truth and clarity in advertising. To this end, IVW provides advertising and media planners with objectively determined circulation data for advertising media. In this way, IVW gives advertising customers certainty that their advertising orders are being carried out in accordance with the contract. In addition, the work of IVW enables fair competition between the advertising media. In order to achieve these goals, IVW obtains and publishes comparable documents on the circulation of individual advertiasing media. In addition to print, radio and cinema, this also includes digital and paid content. • agma (Arbeitsgemeinschaft Media-Analyse; cf. agma, 2021) The purpose of agma is to promote scientific research in mass communication for media and marketing planning. In addition, a high performance standard of such research is to be ensured. The agma media analysis comprises the current usage data for the media categories of daily newspapers, magazines, cinema, reading circles, Internet, posters, radio/audio and television. This media analysis maps the media usage behavior of the population aged 14 and over in Germany. The results of these surveys are accepted as advertising currency by the companies in the industry. In some cases, the samples include more than 70,000 interviews. In addition to media usage, this media analysis also provides detailed information on leisure and shopping behavior as well as household furnishings. • AWA (Allensbacher Markt- und Werbeträgeranalyse; cf. AWA, 2021) The AWA determines attitudes, consumer habits and media use of the population in Germany on a broad statistical basis. With its broad range of topics and extensive investigations into media use in the areas of print, TV, radio, Internet, cinema and outdoor advertising, the AWA is one of the most important German market media studies. The AWA covers the following print media: –– –– –– –– ––

212 general-interest magazines 4 weekly newspapers 13 customer magazines 4 national daily subscription newspapers 7 purchase newspapers

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–– regional subscription daily newspapers (as a media type) –– 2 household advertising: Einkauf aktuell and advertising journals –– Official gazettes, newsletters (as a media type) For the AWA, interviews are conducted with around 23,000 people nationwide. The AWA follows the single-source principle: all information is gathered by trained interviewers in a personal interview. The results of the AWA are representative of the German-­speaking resident population aged 14 and over. • LAE (Leseranalyse Entscheidungsträger in Wirtschaft und Verwaltung; cf. LAE, 2021) The LAE is a reader analysis focusing on decision makers in business and administration. It sees itself as the only market media study that deals with the target group of decision makers. This study provides the basis for professional media planning in B2B communication. The LAE brings transparency to the target group of decision-­ makers, which comprises almost three million people in Germany. This includes: –– –– –– ––

1.67 million executive employees 0.23 million senior officials 0.57 million self-employed with at least six employees 0.49 million liberal professions with at least one additional employee

• b4p (best for planning; cf. b4p, 2021) b4p is a market media study for Germany. The study analyzes the purchasing and usage behavior of consumer goods and services. Approximately 2400 brands in more than 120 market areas are included in the data collection. The recording of individual interests, needs and desires enables a connection to be made between the target groups relevant to advertising and the brands. For this purpose, the b4p study maps the most important media channels according to the model of the studies of the agma. These include 181 magazines, 58 daily newspapers, 10 TV stations, radio and online audio, posters, cinema and some smaller media. In addition, nearly 800 websites, more than 450 mobile offerings and more than 200 apps are reported. This wide variety of media makes it possible to calculate cross-media brand reach. • agof (Arbeitsgemeinschaft Online Forschung; cf. agof, 2021) agof is an association of the leading online marketers in Germany. By means of a standardized online coverage currency as well as a variety of data relating to the use of digital media, agof contributes to making the classic and mobile Internet transparent and plannable advertising media. • VuMA (Verbrauchs- und Medienanalyse; cf. VuMA, 2021) As a consumption and media study, the VuMA Touchpoints links purchasing and consumption information with current data on media usage. Based on the data obtained, the users of selected media can be “matched” with the use of individual product catego-

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ries. This enables advertisers and media planners to address target groups in an effective, consumption-oriented manner. For this purpose, the consumption and media analysis combines usage data from television and radio as well as other relevant media with detailed information about consumption. Advertisers and agencies have a useful tool at their disposal for media planning. The market research methods described in Sect. 2.2.4 can also provide important insights for media planning (e.g. GfK television research). Connected with the question of which target persons are to be addressed via which advertising media and advertising material with which communication strategy is the content-related design of the communication. Advertising research has shown that the different perceptions (hearing, seeing, tasting, smelling and touching) can influence each other to a great extent. When they act simultaneously on the brain, the effects can multiply (cf. Nölke & Gierke, 2011; Schmitz, 2015; Hartmann & Haupt, 2016). The reason for this amplification effect is that the different sensory impressions are indeed stored in different places in the brain. However, the impressions are linked together by a complex neural system. The impression of an offer in which the same message is communicated via different senses is therefore many times higher than the sum of the individual impressions. This is where the phenomenon of multisensory enhancement occurs. With a high and simultaneous congruence of senses, our consciousness experiences an event up to ten times more strongly than would be expected from a pure addition of the individual sensory impressions. The aforementioned congruence of sensory impressions is indispensable for this effect. If there is incongruence, where the impressions do not match, this amplification effect is prevented (cf. Lindstrom, 2019, pp. 155–158; Häusel, 2019, p. 14). The challenge for companies is therefore to address customers simultaneously via a wide variety of sensory channels in a coherent manner. This can create a strong and lasting impression – both positive and negative (see Fig. 5.67).

Feel

Optics

Challenge: Reach as many senses as possible through marketing – and provide

Olfactory

Acoustic Taste

Fig. 5.67  Multisensory marketing

them with consistent information!

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The aim of marketing campaigns is to bring as many elements of a product or service as possible into line with the desired positioning of the offer. Through this, companies try to tap into the positive effects of multisenor marketing: • At car manufacturer Audi, teams are busy designing the haptics of the individual controls in the vehicle so that the desired Audi feeling is created with every touch. • Bahlsen, the biscuit manufacturer, and Kellogg’s, the cornflakes manufacturer, spend a lot of energy on making the crunchiest possible sound when you bite into them. This is supposed to enhance the positive taste experience. • At Nestlé, a so-called croustimetre is used to measure the sound perceived by the ear when chewing. This should correspond to the intended product positioning. In addition, this sound should also match the expectations of the target group. While deeper sounds convey “solidity” and “seriousness” for seniors, they simply signal “boredom” for teenagers. Sound designers are responsible in companies for managing the tasks described here (cf. Arnu, 2005, p. 36 f.; Lindstrom, 2019, p. 160 f.). • In the automotive industry, sound designers are busy adjusting the sounds of the engine (e.g. at Porsche) to the expectations of the customer. The sound made when a car door closes is also deliberately staged. If it sounds “thin” and “clattery”, the customer (unconsciously) concludes that the quality is inferior. If a door closes with a rich “plop”, this signals a high quality of workmanship. • At the household appliance manufacturer Braun, a great deal of attention is paid to the noise emissions emitted by an appliance. After all, a product’s performance is inferred from its noise. This is the case with hair dryers, razors, electric toothbrushes and coffee machines (cf. Siehoff, 2005, p. 58). Products that are too quiet can (unconsciously) be assumed to have a reduced performance. • Apple not only attaches great importance to the design and thus the look of the devices (from the iMac to the iPod, iPhone, iPad and iWatch), but also to the materials used. After all, users hold the iPad and iPhone in their hands several times a day. Therefore, the haptic experience must match the values of the brand: After all, the surface of these products may be “stroked” many hundreds of times a day during use. • Car manufacturers are intensively concerned with the question of how a new car should smell. This is because the smell of a vehicle automatically indicates its newness. This special scent is artificially created by the manufacturers, as it does not arise automatically. In many cases, this “new car smell” is introduced separately at the end of the production process (cf. Lindstrom, 2019, p. 159 f.). This so-called new car spray is also applied in the used car trade to mask other scent traces in the car. • Due to the importance of smells as trigger information for a multitude of memories and associated emotions, the term Proust phenomenon was created. We speak of this when a scent or smell is sufficient to cause an entire film of memories to run automatically. Marcel Proust described such an event in his novel In Search of Lost Time. • Supermarkets and sales outlets in railway stations make use of this effect. There, the smell of freshly baked bread is often artificially introduced. An oven does not even exist. The smell alone has a stimulating effect on sales of baked goods (cf. Lindstrom,

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2019, pp.  158–160). With the same objective, a perfume mix is sometimes used in fashion stores, which can also take on a “sunscreen note” in the case of swimwear. The aim is to put customers in a positive shopping mood – to linger longer and buy more! • Relevant studies show that the use of fragrances in retail can improve the mood of consumers – with corresponding positive effects on their buying behavior. However, a prerequisite for this effect is that the scent used at the POS is experienced as matching its emotional quality. In particular, congruent room scents, i.e. those that match the POS, can help to brighten a negative mood of customers (cf. Kroeber-Riel & Gröppel-­ Klein, 2019, pp. 544–546). In order to achieve this, so-called smell artists or scent designers are involved. • In addition, retailers try to create a positive mood by playing music. The customer should feel comfortable in the store. Those who stay longer have more contact with the goods and tend to buy more. cc

Memory Box  The design of marketing – and not only communication – must be holistic. For this purpose, several senses are to be addressed. A coherent use of visuals, acoustics, haptics, taste and smell should secure the intended positioning.

The basic principles presented here must be taken into account when the most important communication instruments are presented below. The delimitation of the individual instruments cannot always be carried out without overlap due to the multiple networking of different types of communication. In sum, the entirety of the communication measures used should achieve the best possible “fit” in terms of the expectations built up by the brand itself and the expectations built up by the accompanying communication (cf. Fig. 5.68). Whether these can be ful-

Labeling

Branding

Brand-related communication

Brand name

Signs, pictures, sounds, scents

    

Packaging (colour, pictures, font, shape, feel)

Associations Precision Ability to differentiate Consistency Credibility

 Faster  More cost-effective  More reliable

„Fit“

Above-the-line communication (TV, radio, print, cinema etc.)

Below-the-line communication (mailing, e-mail, online etc.)

 Visibility/clarity of messages  Autonomy/uniqueness  Consistency of interlinking with other communication measures

Fig. 5.68  Brand building through branding and brand-related communication

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filled in each case is determined by the various moments of truth – ZMOT, FMOT and SMOT (cf. Sect. 3.4.1). The big challenge for companies is to integrate the various communication measures. Only then can a consistent overall impression be achieved with the target group. cc

Memory Box  The need for integrated communication results from the fact that media use by the target audience is always also intermedia use. Therefore, consistent messages must be conveyed on the various channels. This is the only way to achieve a high level of credibility. The requirement here is once again: noline communication!  Such an integration of communication is to be promoted by the form of internal organization, but above all by the coordination processes used. Far too often, the responsibilities for different media or for the different forms of communication still lie in several company departments. This often promotes silo thinking, which prevents or at least makes it difficult to work in a coordinated and integrated manner.

When distinguishing between different communication instruments, a not entirely uniform distinction between above-the-line and below-the-line communication was established (cf. Fig. 5.68): • Above-the-line communication (ATL) Above-the-line communication generally includes the classic forms of communication or the classic communication media and the classic communication channels. If we focus on the advertising media, ATL includes newspapers, magazines, TV, radio, ­cinemas and billboards. The corresponding advertising materials are advertisements, TV, radio and cinema spots as well as posters. • Below-the-line communication (BTL) As a rule, all non-classical forms of communication or non-classical communication media and non-classical communication channels are counted as below-the-line communication. If we focus on the advertising media, BTL includes telephone marketing, mailings and online marketing. The corresponding advertising material are telephone calls, mailings, e-mails, online banners, etc. When these two terms are introduced here, it should be clarified which imaginary line is meant. The image of a ship helps here. Here, only what is above the waterline (“above the line”) is visible to the general public. Everything else (“below the line”) is only visible to the people to whom the measures are directly directed. In my opinion, however, this distinction based on the visibility of the activities does not stand the test of time. A classic advertisement (“above the line”) in the trade journal adhäsion – Kleben und Dichten is much less visible to the general public than a UNICEF mailing campaign sent to two million potential donors (“below the line”).

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The origin of the definition is partly seen on a completely different level – more precisely in the “profitability of different communication measures” from the agencies’ point of view. It is easy to understand that when using classic media (“above the line”) with spots for TV, radio and cinema as well as with ads in newspapers and magazines, much more money can be earned than with mailings, e-mails, online banners and telephone marketing (“below the line”). After all, above-the-line campaigns can require elaborate shootings with exciting directors and cameramen at interesting locations. In many cases, celebrities are also involved. Celebrities are famous people who appear in commercials or advertisement – for example, Nicole Kidman for Chanel or George Clooney for Nespresso. When using mailings and online banners as examples of below-the-line campaigns, stock material is often used. Stock material includes already existing own or third-party photos. Third-party photos are made available via image agencies such as Shutterstock. Expenditure on text and layout also tends to be kept within limits, similar to the creation of scripts for telephone marketing. Thus, the imaginary “line” would hit the areas of an agency that have higher or lower profitability. Whichever definition is adopted: The ATL and BTL classifications shown still remain and have their place in the advertising vernacular.

5.4.3.2 Advertising If you stop advertising to save money, you might as well stop your clock to save time. Henry Ford We are not selling cosmetics. We sell hope. Charles Revson, US-American entrepreneur, founder of the cosmetics company Revlon

Advertising is a communication instrument through which information, influence and control goals are to be achieved with regard to the company’s core activities with the target groups of target customers, prospects and customers. In comparison to sales promotion, advertising usually has a longer-term orientation. Different media and advertising materials can be used for advertising. The basis for deciding how to advertise is a briefing from the advertising company. If possible, this should not be limited to general phrases, as I encounter them again and again: Develop an advertising campaign to increase brand awareness for shampoo XY in the target group 40 to 60 years. In addition, sales are to be promoted. A market share of 3% is to be achieved within twelve months. Advertising budget € 15 million (net). Deadline for submission of campaign concept next Tuesday, 15.00 hrs.

A briefing must define the target and the general direction of the planned advertising. A convincing briefing is the indispensable basis for the work of advertising and media agencies. The following components of a briefing are relevant for a campaign to acquire new customers:

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• Targets How many new customers are to be acquired through the acquisition activities? The quantification of the targets is indispensable. After all, the measures can only be evaluated after they have been implemented if the objectives have been clearly defined at the beginning (see Sect. 3.2). For the acquisition of new customers, for example, the objectives should be quantified as follows: Acquisition of 500 new customers, 2000 newsletter subscribers and 4000 Facebook fans. 50 likes are to be achieved per post. Furthermore, 500 app downloads and 1000 store visits are to be achieved. In addition, precise goals for brand awareness and certain image dimensions can be defined. • Target group How is the “booty grid” defined? What kind of customers are particularly valuable for the company? Who should primarily be acquired as a new customer? The persona concept is used to specify the target groups (see Sect. 4.2.2.3). • Basic message What content is the focus of the advertising approach? Should the company be presented in general? Or are specific products or services to be placed at the center of attracting prospective customers? Which messages will motivate the most people to contact the company and make a purchase? • Benefit arguments Which benefits should be highlighted in advertising? Is it the unique quality of advice, the wide or deep range of products? Is it the good accessibility directly on site? Are the offers particularly attractive in terms of price? Your own value proposition should stand out from that of your competitors. In addition, the advantages of the advertised offer should be presented in such a way that people feel motivated to react immediately. Statements such as “Choose from the complete new collection now!”, “Profit from our price advantages now!”, “Get to know the trade fair novelties now!” can contribute to this. These are powerful calls-to-action. • Justification of the value proposition Promises are made by many companies. However, it is also necessary to justify why a company can also keep these promises. This is called the “reason why”. Possible “reasons” can be: “Just back from the trade fair in Milan”, “Benefit from our bulk purchase”, “Use our latest study results”, etc. • Positioning of the products and services offered The briefing should also define which positioning a company and/or a brand is aiming for in the market (cf. Sect. 4.2.2.2). Are companies or brands more likely to be in the premium segment? Or is a position in the middle market with a convincing price-­ performance ratio aimed for? Or do they try to market their own offers primarily through low prices? These decisions affect the communication channels to be selected. Online platforms, but also newspapers and magazines come to mind here. The quality of the materials used must also “transport” the desired positioning – e.g. the quality of the paper used for mailings, postcards, flyers and inserts.

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• Design of the advertising material When designing the advertising material, the question arises as to the tonality of the approach. Is it more technical or more helpful and thus partnership-oriented? Are individuals, groups of people or the family more likely to be addressed in advertising? Are small businesses more likely to be seen in the visuals? Or do they focus on successful, internationally active managers? Are the images used primarily product-related or do they focus on people? Are the photos rather cool or do they convey a comfortable atmosphere? • Use of advertising constants To ensure recognition of the advertising, so-called advertising constants can and should be used. These advertising constants are also called key visuals. These can be logos, certain symbols or lettering that are used again and again. At the company level, these are part of the corporate design (cf. Sect. 5.4.5.1). At the brand level, these elements belong to the brand image in the brand steering wheel (cf. Fig. 3.10). When using advertising constants, care must be taken to ensure a high level of recognition through the same colour scheme and the same positioning in different advertising media. These key visuals are to be used in unchanged form over a longer period of time. In this way, important learning effects can be achieved with the target persons. • Integration of a response mechanism When acquiring new customers, a direct and fast reaction of the addressed is often desired. Ways to respond are to be offered for this purpose. In the offline environment, order cards and coupons can be used to motivate recipients to respond. In the online environment, e-coupons, app downloads or links to the website or the online shop can trigger an immediate reaction. In order to trigger a quick reaction, so-called reaction boosters are used. These can be price advantages that are only granted temporarily (“scarcity principle”). A company can also promise a bonus to the “first 100 buyers”. • Timing Here the important question arises: “When and how long should the campaign to attract new customers run?” It goes without saying that this takes into account holiday and vacation periods. When it comes to advertising, you don’t always have to follow the industry’s rules of the game. You can also set your own temporal accents. • Success control In order to determine the success of the advertising measures, the possibilities of success control are to be considered already in the conception phase. Here we also speak of success metrics or KPIs to evaluate the success of the measures. For this purpose, the advertising media used must be provided with a mechanism for measuring success. When using coupons, it is easy to determine online and offline how many coupons have been used and which sales have been stimulated by them. In the case of advertisements, action codes can be used to trace reactions to various advertising stimuli (cf. Kreutzer, 2021a, p.  177 f., 246). In the online sector, the evaluation of traffic on a website and in the online shop can be used to monitor success in many other ways (cf. Kreutzer, 2021b).

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• Budget In addition, the budget for conception, development, production and placement of the communication measures must be defined. Far too often, advertising agencies as well as in-house advertising departments are still controlled by budgets – instead of goals. This should be changed quickly. However, advertising partners will not be very happy if very specific expectations regarding the number of new customers to be acquired are defined for the provision of the budget. However, this “forces” the partners involved not to lose sight of the central acquisition goals. cc

Memory Box  Time is required for the development of a briefing. However, this is well invested! Because the more precise the thinking before the action, the more successful a campaign will be. Consequently, a profound briefing is an indispensable prerequisite for a convincing campaign success. 

We speak of classic advertising when it is transmitted via the classic media. Classic media include TV, radio, newspapers, magazines, cinema and outdoor advertising. These media are called “classic” because they have been on the market for a long time. Newspapers, magazines, advertising journals, address books and telephone directories, among others, are available for advertising in print media. These are insertion media. The term “insertion” is derived from “inserting”, which means “placing an advertisement”. Newspapers can be distinguished from magazines primarily by their physical appearance. Newspapers are often printed on lower quality paper. In addition, the individual sheets are folded into each other. This means that the sheets usually remain unbound. In the case of magazines, the paper tends to be of higher quality and the sheets are stapled or glued. A distinction between newspapers and magazines in terms of topicality, periodicity (frequency of publication) and/or universality (in terms of the breadth of the range of topics covered) is not helpful in differentiating between them. Newspapers and magazines come in many different forms and can be differentiated according to the target group addressed: • General interest title General interest titles are aimed at a broad target group. General interest magazines primarily include current interest magazines and TV programme guides. These are also referred to as general interest magazines. General interest magazines include Der Stern, Der Spiegel, HÖRZU and Apotheken Umschau. The Apotheken Umschau reaches approx. 18.7 million readers per month in Germany. The same classification can be applied to newspapers. The general interest newspapers include Bild, Frankfurter Allgemeine Zeitung/Frankfurter Allgemeine Sonntagszeitung and Die Zeit. These titles address the whole population with topics of general interest and usually have high circulations and large reach. This is why we also speak of mass or wide-­ reach titles.

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• Special interest title Special interest titles are geared to special target groups. In principle, they also address the population as a whole – but with a clear thematic focus. These include magazines that focus on fishing, food, cycling or golf. These editorial focuses limit the possible reach. Special interest magazines include Bike, Eltern, Essen & Trinken, FliegenFischen, Golf Magazin and ZEIT Campus. Special interest newspapers aimed at specific groups of people include Computer Bild, Auto Bild and Sport Bild. • Trade journals and trade newspapers In contrast to the aforementioned general and special interest titles, trade magazines and trade newspapers are aimed at target groups that can be defined by specific areas of expertise. Specialist titles are an important advertising medium in B2B communication. Important target groups for these specialist media are professional users of plant/ machinery, office furniture as well as sales agents or experts. These experts include doctors, architects, consultants, farmers, marketing managers, lawyers and trainers. The trade journals include absatzwirtschaft, Arthroscopy, Journal of Business Economics and SUS – Schweinezucht und Schweinemast. The trade journals also have a special thematic focus. These include aghz  – Allgemeine Hotel- und Gastronomie-­ Zeitung, Lebensmittel Zeitung, HORIZONT – Marketing, Agenturen, Medien and ZfK – Zeitung für kommunale Wirtschaft. A list of trade publications can be found at fachzeitungen.de. 

Food for Thought  Classify the print media you have access to once into the categories “general interest”, “special interest” and “specialist media”.

Various types of advertisements can be placed in print titles. The most important types of advertisements are presented below: • Monologue advertisements In monologue ads, the reader is not offered the opportunity to make direct contact with the advertising company. The aim of monologue ads is usually the general announcement of the offer, a transmission of information and/or just image building. If the readers are to be motivated here to an action, then this is the independent search and/or search of websites, on-line and/or off-line shops, without any support offered. Pure monologue ads, which do not even provide a website address, are used less and less today. In some cases, product samples are applied to such monologue ads. This is often the case with cosmetic products such as creams, shampoos and perfumes. These samples are meant to motivate the readers to try the product once. Again, it is left to the readers’ own initiative to find relevant shopping sites.

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• Dialogue advertisements In a dialogue ad, the reader is immediately invited to make contact. For this purpose, the reader is offered one or even several channels for dialogue. This is why these ads are also referred to as direct response ads (DR ads) (cf. 5.4.3.5; Kreutzer, 2021a, pp. 172–176). To initiate contact, the Internet address can be included in the advertisement as a communication channel. This Internet address is also called URL  – Uniform Resource Locator. It is the information to be entered in the address bar of a browser to get to a specific website. The use of a QR code (“QR” stands for “Quick Response”) makes it easier to enter this URL. Here, the reader only has to scan the QR code to land directly on the company’s website. This saves having to enter an often longer Internet address or URL (cf. Sect. 5.4.3.6; Kreutzer, 2021b, pp. 160–162). The use of a coupon with a price advantage also facilitates the entry into the dialogue and at the same time serves as a response booster. In sum, it is important to offer the reader several relevant response channels. In addition to the specification of an online address (URL) for contacting, the specification of a postal address, an e-mail address, the telephone and/or fax number can also be made. cc

Memory Box  DR advertisements aim to trigger an immediate reaction from

the reader. For this purpose, either further information, offers or specific advantages are promised. Monologue advertisements do without such incentives to make contact.

Newspapers and magazines can also be used to carry advertising inserts. Many stationary retailers take advantage of these opportunities week after week. Inserts and supplements also regularly reach readers via newspapers and magazines. Such supplements are stand-alone print products. Examples of such supplements in newspapers are the TV programme supplements PRISMA and rtv. Red Bull’s “The Red Bulletin” and Google’s “Aufbruch” magazine are also distributed as supplements. These supplements are in turn a special advertising medium. The following criteria for the selection of advertising media can be used to decide which print titles should be used: • Publication rhythm How often does the advertising medium appear? Daily, weekly, bi-weekly, monthly, quarterly, etc.? • Time lead for a publication How far in advance should the required data be given to the publisher of the advertisement? • Reach of the title How many people can be reached by a medium? Bild has a reach of 6.3 million, Süddeutsche Zeitung of 1.21 million, Frankfurter Allgemeine Zeitung of 870,000, Die Welt of 510,000 and Handelsblatt of 450,000 (see Statista, 2021g). Further information is provided by the AWA (2021).

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• Target group coverage How well can the defined target group be reached via a title – for example in a comparison of Der Spiegel via Apotheken Umschau to Bild der Frau? • Image of the title What credibility, what trust and overall what value does the target group place on this medium? Here we can think of the different credibility of Frankfurter Allgemeine Sonntagszeitung in comparison to “Bild am Sonntag”. • Costs for the publication • How high is the circulation of a medium? How many people can be reached through it? What are the absolute costs for placing a 1/1 4 colour ad (cf. Die Zeitungen, 2021; Der Spiegel, 2021)? –– Frankfurter Allgemeine Sonntagszeitung: circulation 210,000, advertising rate of € 65,000 –– Frankfurter Allgemeine Zeitung: circulation 219,000, advertising rate of € 73,970 –– Handelsblatt: circulation 127,000, advertising rate of € 64,750 –– Die Harke (regional daily newspaper): circulation 15,000, advertising rate of € 4313 –– Der Spiegel (1/1 ad inside the magazine): circulation 650,000, advertising rate € 82,700 To determine the price per thousand contacts, the advertising prices must be set in relation to the number of readers. The importance of television as an advertising medium is already illustrated in Fig. 5.64. Figure 5.69 shows the background against which a great deal of money continues to flow into TV advertising. The media usage figures shown there are based on a survey of 2461 people aged between 14 and 69 in Germany (cf. Statista, 2021h). In 2020, television was the medium with the longest daily usage time in Germany, with an average of just under 4 hours of use per day (cf. Fig. 5.69). The Internet, which is used for content, follows with 133  minutes. Radio comes in third place with 101  minutes. 0

50

100

150

TV

200

250 237

Internet content-wise

133

Radio (total)

101

Telefony

51

Music

48

Games (total)

43

E-mails

40

Messenger/SMS

32

Printed books/e-books

28

Newsletter/e-paper

15

Magazine/e-magazine

7

DVD, blu-ray

6

Fig. 5.69  Daily usage time of selected media in Germany 2020 – in minutes

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While the usage time of television and radio has decreased since 2014, the usage time of the content-based Internet increased from 61 minutes to 133 minutes in the same period. In TV advertising, not only can different channels be chosen (such as ARD vs. RTL), but also different time slots and thematic environments. By placing TV commercials before, during or after sports or cultural programmes, reports, shows, feature films, soap operas or telenovelas, specific viewer groups can be addressed in each case. The target groups of casting shows such as The Voice of Germany or Germany’s Next Top Model by Heidi Klum differ significantly from the viewers of World Cup football matches or crime scene episodes. cc

Memory Box  The CPM for TV advertising (30-second spot) in Germany has

risen from € 10.35 (2000) to € 19.57 (2020; cf. Statista, 2021h, p. 65).

Soap operas are television series such as Gute Zeiten, schlechte Zeiten or Berlin – Tag und Nacht. These are often designed as endless series and are broadcast regularly, sometimes several times a week. They are usually produced cheaply and are intended to create an advertising-friendly environment – for detergents. This is why these series are called “soap operas”. The telenovela as a special form of soap opera is told from the perspective of a (usually female) main character, as in Sturm der Liebe or Rote Rosen. Telenovelas are also characterized as “modern fairy tales with happy endings”. Television is still the most important reach medium. Only through the use of TV advertising can greater awareness be achieved in large target groups in a short time. Today, TV offers a variety of advertising formats (cf. Fig. 5.63). • Classic TV commercial The classic TV spot today is on average 30 seconds long. A tandem spot is an advertising unit consisting of two parts within an advertising block on TV or radio. After the main spot, a shorter follow-up spot is placed as a so-called reminder. In tridem advertising, the advertising unit consists of three parts. • Direct response TV spot The direct response spot contains a call-to-action. The viewer is asked to call, e-mail and/or visit a website. • Special ad/special creation The spectrum of special ads ranges from branded entertainment formats to the creative refinement of a commercial to an individual transition to an advertising contribution. Special creations enable a closer link between programming and advertising. • Title sponsorship/programme sponsoring The aim is to increase viewer acceptance by building a content relationship between sponsor and programme. In this way, advertising content is brought together with popular programme brands, sought-after station faces and attractive target groups. In the case of title sponsoring, the name of the client is implemented directly in the lettering

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and logo of the programme title. In the case of programme sponsoring, the entire programme is presented by a company, for example in ARD’s Wetter vor acht and Wirtschaft vor acht programmes. • Ad specials break Ad break specials are advertising blocks that have a thematic bundling. This is intended to create a harmonious advertising environment. The sentence “now only three spots” motivates the TV viewer not to use the commercial break for other activities. By having only a few spots in an advertising break, a higher level of attention is to be ensured. • Addressable TV spot With the addressable TV spot, the linear TV spot is overlaid with target group-specific content. This results in different target groups seeing different commercials on the same channel at the same time. This is to achieve a higher attention for the advertising content. Consequently, target groups can be addressed more individually in TV advertising. In the future, further digital devices can be integrated. The use of addressable TV is currently under development. cc

Memory Box  Media agencies are involved in order to make the right choice

given the variety of media, time slots, target groups and advertising formats. Leading media agencies are Carat, Mediaplus, Havas Media, OMD Group, Pilot, Mediacom and Mindshare.

Different advertising formats have been developed not only to generate new sources of income, especially for TV stations financed by advertising. These advertising formats are also intended to counter the continuously increasing phenomenon of zapping. The term “zapping” is derived from “zapper” for the remote control. Zapping is the switching from one programme to another. The start of a commercial break is a particularly frequent motivation to switch. The zapping rate indicates the difference between the reach of the programme and the reach of the advertising block. A higher advertising impact is also sought through product placement. Product placement is the placement of products, services or brands for advertising purposes in feature films, soap operas, telenovelas, reports, shows and consumer programmes, among others. Product placement is also the mentioning of specific brands in editorial articles of newspapers and magazines without this being highlighted and/or directly visible as advertising. The inclusion often takes place in return for financial or in-kind contributions. Well-known examples of product placement are provided by the James Bond movies. In the film Spectre, the following products are integrated into the plot: • • • • •

Aston Martin DB10 Fiat 500 Range Rover Omega Seamaster 300 Omega Aqua Terra

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• • • •

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Tom Ford clothing Sunglasses from Tom Ford and Vuarnet Belvedere Vodka Sony smartphone

In the film Pretty Best Friends, the luxury car brand Maserati was convincingly depicted several times. In the crime series Tatort, certain brands also appear regularly, be it Paroli, Marlboro, Audi or VW. Of course, even commissioners cannot chase criminals by bicycle, but one sometimes wonders whether a long shot showing an always freshly washed black Audi or Porsche is dramaturgically necessary from the viewer’s point of view. The previously existing legal grey area, which was made clear by the term surreptitious advertising, has largely been eliminated by law. The Medienstaatsvertrag (MStV, 2020) – an interstate treaty on media – regulates the obligations and rights of all media providers (broadcasting and telemedia) in Germany. This treaty has been in force since 7 November 2020. Member-gets-member activities are a special form of advertising. This is also discussed under the term tip a friend. The basic idea is that own customers win other persons from their personal environment as customers and are rewarded for it. This type of advertising is used for newspaper and magazine subscriptions, online shops and financial services, among others. Member-gets-member activities are a particularly credible form of advertising because the “sales pitch” is based on a personal relationship. Through tip a friend, particularly valuable customers can often be acquired. Due to the success of this approach, it has now been developed further so that non-customers can also acquire new customers. Although this contradicts the original idea of the member-gets-member approach, such concepts are used very successfully (cf. Kreutzer, 2021a, pp. 245–247). A communication tool known as buzz marketing is based on a similar principle. “Buzz” means that many people should talk as intensively as possible in public and/or in their circle of friends and acquaintances about the advantages of products or services. Buzz marketing includes the more or less intensive involvement of a company’s own customers or persons appearing as such who actively or passively highlight a particular offer in their respective environment. Therefore, these persons are called buzz agents. In essence, buzz marketing is a specific communication tool that can complement the previous communication mix of companies. The creative approach of buzz marketing lies in the use of the agent’s personal relationships or in the clearly visible product use in public. This is intended to create a snowball effect on the consumer side. Furthermore, buzz agents are also active as buyers. For this purpose, several agents independently ask for a certain product in a large number of stores at different points in time. This pull strategy leads to demand that is perceived by retailers. If retailers expect a sustainable demand, they could include the products in their assortment. This should trigger a snowball effect on the retail side. After all, the product’s presence in the trade creates a certain demand quasi automatically. However, the concept stands and falls with the quality of the product. A first-time consumption can be triggered

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by a word-of-mouth recommendation. However, if the product is not convincing, the effect fizzles out and the desired snowball effects fail to materialize. Guerrilla marketing (derived from “guerrilla” in the sense of small-scale warfare) is essentially “only” a specific form of communication policy. It attempts to break out of the well-trodden paths of cost-intensive communication both online and offline. Instead, the aim is to achieve as much attention as possible with often small but surprising and ­unconventional actions. Since the boundaries of legality are sometimes crossed in these activities, the term “guerrilla” is used (cf. Levinson, 2016). Ambush marketing is a special form of guerrilla marketing (see also Fuchs, 2019). The term is derived from “to be ambushed”. In this case, a company acts as a free rider at an event with its own advertising, without having paid sponsorship money for this event itself. Such a procedure takes place in the context of football matches and concerts. While company A was active as a sponsor, company B presents itself in the environment of the event and tries to attract a lot of attention. The goal of the advertising company in ambush marketing is to attract attention at such events and possibly even be considered a sponsor, even though nothing was paid for it. Ambient media advertising is becoming increasingly important. Ambient media or ambient marketing or ambient advertising is a special form of outdoor advertising. Ambient media is a form of advertising that is placed in the direct living environment of the target group. Therefore, the term “ambient” is derived for the target person “surrounding”. Through ambient media, target persons are addressed with advertising in places and situations where they do not classically expect advertising. Ambient media includes the placement of advertising information in subways (presented on information screens), in restaurants and in public spaces in general. This is intended to overcome the limited accessibility via classic media – for example with very mobile target groups. Examples of ambient media are also displays in the cinema entrance area as well as advertising notices that are placed at eye level on the pumps at petrol stations or in men’s toilets. Free postcards distributed in restaurants (e.g. Edgar Freecards), mobile digital out-of-­ home solutions and transit advertising also belong to the ambient media category. The price per thousand contacts for these advertising formats is often higher than that of classic media. The integration into the media plan of companies can be relevant, because a significantly better contact quality can often be achieved and certain target groups can possibly only be addressed in this way. cc

Memory Box  Advertising alone does not lead to success – and successful com-

panies do not necessarily have to rely on advertising. The beer brand Oettinger has become one of the most important suppliers on the German beer market even without advertising. At Oettinger, the focus is on price. Zara has also achieved its high-profile position in the textile market without major advertising campaigns. The main contributor to Zara’s brand awareness is a target group that intensively exchanges information about Zara’s offers – without any advertising impetus. 

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5.4.3.3 Public Relations The focus of public relations (PR) is to build positive relationships between the company and the general public. The target group of PR goes far beyond the actual and target customers as well as the prospects. Through PR, political decision-makers, the general public, the media, investors, shareholders, suppliers, competitors and also the company’s own employees are to be informed about corporate actions and corporate responsibility. In doing so, the company tries to influence its own image in a certain direction. Through PR campaigns, the company tries to build up as positive an image as possible in the public eye. PR can be oriented towards the core of the company’s activities. Successful product developments are presented, important patent applications are reported on or programmes for the qualification of the company’s own employees are highlighted. The company’s contributions to the conservation of resources and thus to the topic of “sustainability” also belong in this category. The responsible handling of customer data is also part of these activities. In addition, the company can also assume responsibility beyond its own core business. For example, PR releases report on the company’s cultural and sports sponsorship. cc

Memory Box  The PR principle is: “Do good and talk about it.” 

Generally speaking, a company can have a lasting impact on its own public image through proactive PR. Companies that do not provide information to the public and especially to the media are often the subject of speculation. In order to shape the image of the company, the following instruments of public relations can be used: • Press conferences Press conferences aim to convey a specific image of the company to the invited press representatives. For this purpose, online and offline press kits are usually prepared that contain ready-made press releases (often in long and short form) as well as images, some of which are used directly in publications. Press conferences also offer the opportunity to obtain background information by asking questions to the company representatives. Press conferences are held quarterly or annually as standard. Additional events are held before or after corporate acquisitions and to present new products and service fields. The aim here is to inform the general public about the associated goals and strategies. • Annual general meetings Annual general meetings are also a good opportunity for corporate self-presentation. Major media representatives are often present at the larger and/or interesting (listed) public companies. Through their reports, the central messages of the companies flow into the national and international news broadcasts. • Press releases In addition to the above-mentioned events, which take place at longer intervals, publicity-­oriented companies have online and offline press distribution lists. Press

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releases are sent out regularly via these distribution lists. In addition, many companies offer a “press area” on their website that provides further information for the media (cf. on online PR Kreutzer, 2021b, pp. 280–290). The challenge of PR is to address exciting fields or developments in order to remain present in the media. The information provided can be rounded off by background discussions with selected press representatives as well as editorial visits. • PR ads/image spots/mailing campaigns/social media measures To achieve the desired public perception, companies can use the tools also applied for advertising. Classic advertisements make just as much of a contribution to image cultivation as direct mail and online campaigns. TV commercials and social media campaigns are also used for PR purposes. • Activities of company representatives The image of a company in public and thus also among competitors and especially among potential and current customers and employees is also influenced by the appearance of leading company representatives. Such appearances can take place at conferences and seminars. Today, however, the engagement of company leaders in social media dominates. These contributions can have both positive and negative effects. They can even have a direct impact on the share price. The high-profile activities of Elon Musk, the CEO of Tesla and Space X, come to mind. • Company open day An open day offers the relatives of the company’s own employees, media representatives and other interested parties the opportunity to get to know the company better. Through direct encounters, certain prejudices or fears can ideally be reduced. At the same time, greater proximity can be created between the company and the interested public. In the case of accompanying public relations measures, it is not so much creative as ethical limits that must be taken into account. To support a professional public appearance, specialized PR agencies are often involved (cf. www.gpra.de). cc

Memory Box  Due to its importance for the entire company, the task of public

relations is often organizationally assigned to the chairman of the board or the top management. 

5.4.3.4 Sales Promotion In contrast to advertising, sales promotion is short-term and much more directly sales-­ oriented. The duration of sales promotion activities is limited and can range from a few days to a few months. Sales promotion often includes not only communicative aspects, but also instruments from other fields of the marketing diamond. The following types of sales promotion can be distinguished (cf. Fig. 5.70):

384

5  Marketing Tools Manufacturer Trade promotion

Consumer promotion  Sampling

 Sales persons´ training

 Sweepstake

 Dealer competition

 Product presentation at POS

 Additional discounts

Sales force promotion

 Sales force training  Competition within the sales force  Additional benefits/bonuses

 Tasting

Sales force

 Second placement  Coupons with price/product

Retail

advantages

Target customer (B2C, B2B)

Fig. 5.70  Types of sales promotion

• Consumer promotion Consumer promotions directly address the target customer. For this purpose, secondary placements are set up in retail outlets. There, tastings can also take place and competitions can be organised. Coupons distributed online and offline can be used to grant price advantages for a limited period of time. The objective is to persuade customers to make a purchase. • Trade promotion (dealer promotion) Through trade promotions, manufacturers woo the trade partners. These partners are motivated by specific incentives to increase their commitment to selling the manufacturer’s goods. For this purpose, the manufacturers offer, for example, sales training, special sales competitions or additional discounts for a limited period of time. • Sales force promotion Sales force promotions are aimed directly at motivating the sales force. For example, the sales force should be encouraged to sustainably increase sales within a specific time window. Sales competitions or additional bonuses can also be used for this purpose. In direct sales, the sales force can contact the end customer directly. This is the case with Vorwerk with regard to consumers and with Bosch with regard to industrial customers. As in the pharmaceutical market, the sales force can not only address doctors but also pharmaceutical wholesalers and pharmacies. cc

Memory Box  All types of sales promotion ultimately aim to increase sales –

and hopefully profits – for the company in the short term. 

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5.4.3.5 Direct Communication or Dialogue Communication Direct or dialogue communication (hereafter referred to as dialogue communication) represents a particularly important instrument of direct or dialogue marketing (cf. Kreutzer, 2021a; Holland, 2016; Peppers & Rogers, 2016). Dialogue communication essentially comprises all activities that use one-step (direct) communication to reach target groups. The approach can take various forms: • Individual one-to-one approach The individual approach is geared towards each individual recipient. Based on the previous customer history (e.g. previous purchases) or on further data, a completely individual approach is made. Then it says: “… for you as a driver of the Audi A5 Cabriolet …”. Or a specific insurance offer is presented on the basis of the date of birth: “… our lower entry-level premiums are only valid until your birthday on May 9th …”. Such an address can achieve a high relevance of the messages conveyed. • Personal one-to-one contact In the case of the personal individual address, a larger target group is addressed by name with identical content (“Dear Ms. Paschen, …”). However, there is no further individualisation of the contents of the letter. • Partially addressed approach An only partially addressed approach exists if a household is addressed as follows: “To the gardening friends of the house Alter Heeresweg 36 in 53639 Königswinter”. This is a specific form of mailing by Deutsche Post called Postwurfspecial. • Unaddressed approach An unaddressed approach is made through the house distribution of product samples (sampling) or through Postaktuell. Postaktuell can be used to distribute ­unaddressed advertising leaflets, flyers and catalogues to selected households  – from regional to nationwide. Here, too, there is a direct address because the message reaches the target person’s letterbox directly. Dialogue communication also includes activities that use multi-level communication to establish direct individual contact. These include specific designs of the advertising media already discussed. A TV spot becomes an instrument of dialogue communication if a direct response option is offered. In such a DR TV spot, one or more of the following contact options are offered: • • • •

Mailing address E-mail address Homepage or other specific Internet address (URL) Phone number

The aim of a DR TV spot is to get the viewer to react immediately in the sense of a direct response (DR).

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cc

5  Marketing Tools Memory Box  By integrating various response options, classic advertising media become response media. And classic advertising materials become response advertising materials. Through the invitation to react, the effect of advertising can be evaluated much better. By integrating response capabilities will:

• • • •

a TV spot becomes a DR TV spot, a radio spot becomes a DR radio spot, an advertisement becomes a DR advertisement and a poster becomes a DR poster.

Most online offers from companies today aim to get an direct response from the user. This is the case with online banners, keyword ads and many social media engagements. In many cases, corporate websites also call for a response – for example, by offering a newsletter or the download of further information (cf. Kreutzer, 2021b). cc

Memory Box  By asking for a response, the companies try to lead the viewers,

listeners, readers or online users out of their anonymity. Only by obtaining contact details can the companies address these people  – called prospects – directly. 

The acquisition of these contact data is often the primary objective of sweepstakes. If an address, a telephone number or an e-mail address is available, a direct interaction and thus a dialogue with the persons behind it can begin. It is important here that when using telephone and e-mail, the necessary permissions for contacting must be available. Such permission is not required when contact is made by a personally addressed letter. The terms dialogue communication and dialogue advertising should be used precisely: • Dialogue communication and not dialogue advertising is used when the focus of an approach is not based on advertising objectives. For example, an association representing the interests of the pharmaceutical industry may address important politicians by e-mail in order to motivate them to intervene in a particular legislative procedure. This is based more on PR objectives. • Dialogue advertising is when directly effective communication instruments are used to achieve advertising objectives. One of the most important instruments of dialogue communication and thus also of dialogue advertising is the mailing. This is also called direct mail, advertising letter or – in distinction to e-mail – white mail. Mailings can be used for different target groups: • Addressing own customers Many companies are able to gain customer addresses as part of the sales process. This is the case with many online shops as well as other types of direct sales. However, many

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manufacturers and also many retailers still do not know their (end) customers. To close this gap, more companies are using customer loyalty systems. One of the central goals of these systems is to obtain address data and other information. Only then can the customer dialogue begin (cf. Sect. 5.4.5.2). • Addressing target customers In order to address target customers, their addresses can be rented in the B2C and B2B markets for advertising purposes (cf. the explanations on acquisition-oriented segmentation in Sect. 4.2.2.3; on address rental Kreutzer, 2021a, pp. 101–117). Before using the rented addresses, it is recommended to check them against the Robinson list for mailings maintained by the German Dialogue Marketing Association (DDV – Deutscher Dialogmarketing Verband). Persons who do not wish to receive addressed advertising letters from companies with which they are not a customer or have not expressly agreed to receive them can be entered in this list (cf. DDV, 2021). Further information is available at www.ichhabediewahl.de. Deutsche Post continually publishes studies that examine the effectiveness of mailings – also in combination with other media. Here are some of the studies that can be downloaded from the Deutsche Post website: • CMC Print Mailing Study 2022 • Dialogue Marketing Monitor 2021 Telephone marketing is also an important instrument of dialogue communication. There are two different forms of telephone marketing: • Inbound telephone marketing (in the sense of “coming in”; also passive telephone marketing) In passive telephone marketing, a person contacts the company to request information, make a complaint or place an order. In addition to the acquisition phase, inbound telephone marketing is also of central importance in the context of customer care. In customer service centers, the various communication channels for prospects and customers are often managed. In addition to the telephone, this also includes communication via letters, e-mail and fax as well as the exchange via blogs, communities and social media. • Outbound telephone marketing (in the sense of “going out”; also active telephone marketing) In active telephone marketing, company employees or corresponding service providers make direct contact with the target person. SMS as well as WhatsApp messages are also part of outbound telephone marketing. Based on the data already available in the company, outbound calls can be made to get additional information and to drive sales. Such a telephone call often enables an intensive exchange of information, which is, however, very time-consuming and thus costly and should therefore be used in a very focused manner. Furthermore, advertising telephone calls requires in many countries the explicit consent (permission) of the called party.

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Mobile marketing is a particularly important form of telephone marketing (cf. Kreutzer, 2021b, pp. 387–405; Rieber, 2017). This includes all communicative measures that a company initiates using telephone contact via mobile devices in order to directly influence the behavior of prospects and customers. This is the reason why app marketing is so important. Apps – an abbreviation of application – are programmes that enable very easy mobile access to content available online. Mobile marketing offers companies the fields of application shown in Fig. 5.71. • Mobile transmission of information by companies The type of information provided on mobile first includes advertising. This is referred to as mobile display advertising. Due to the increasing spread of mobile applications, it is understandable why mobile online advertising is gaining dramatically in importance. Due to the relevance of apps for mobile Internet use, in-app ads – the integration of advertising into the apps themselves  – are increasingly being used. These forms of advertising tend to be more effective than classic mobile display advertising, as users are actively engaged with the app in question at the moment the ad is displayed. However, it must be examined which goal is to be achieved with the app: monetization via advertising or engagement with the content of the app provider itself. Advertising can also be used to implement location-based services. In this case, the advertising content is targeted to the user’s location. However, permission from the recipient is required for this. Coupons from the customer loyalty programmes Payback or BSW can be targeted to the region in which the person is located. At the same time, route planners make it easier to find the relevant providers. Other projects aim at the delivery of “suitable” coupons directly at the POS, if the user is in the vicinity. In addition, location-independent information can be accessed on the move. This includes the free news of many newspaper publishers as well as TV and radio stations. Free information (e.g. from Deutsche Bahn) also belongs to this segment. • Mobile gathering of information by companies

Mobile marketing Mobile transmission of information

Mobile sales and mobile delivery of virtual products and services

Mobile gathering of information

Mobile sales of real products and services

Fig. 5.71  Fields of application of mobile marketing from the company’s point of view

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Mobile contact with prospects and customers can also be used to gain further information about them. Surveys or competitions are ideal for this purpose. In addition, the permission-based localization of users generates exciting data streams. • Mobile sales and mobile delivery of virtual products and services Virtually available products can not only be ordered mobile, but also delivered mobile. This applies to online games, music, videos, books, newspapers and magazines. In some cases, this content is presented in special apps and allows the purchased content to be listened to, watched, read or otherwise used immediately. Services can also be accessed on the move. These include the free or paid offers of streaming service providers such as Amazon Prime, DAZN, Netflix and Spotify. The purchase of virtual products and services is accompanied by payment transactions. The payment of these transactions, which belong to mobile commerce or m-commerce, also takes place via digital platforms. These include PayPal and giropay as well as Apple Pay, Facebook Pay, Google Pay, WeChat Pay & Co. • Mobile sales of real products and services Ordering real products (e.g. clothing from H&M or Zara) can also be done on the move. The same applies to the booking of services that are used in the physical world. This includes flights, overnight stays or the use of rental cars. Payment transactions also go hand in hand with this. While there is no connection to the user’s location in the case of an order for clothing, this is the case for the mobile purchase of a ticket for the parking machine or for the use of a subway. All of these purchase transactions that are triggered by mobile devices also count as m-commerce. Many of the applications described here are based on apps, which continue to spread at an inflationary rate. This development is also fueled by the fact that most apps are offered free of charge. Paid apps have also only had an average price of around US-$ 2 worldwide since 2009 (cf. Statista, 2021i). In the case of apps, a distinction can be made between various app business models, some of which also occur in combinations: • Free apps for different services These apps tend to have the largest user base and are funded by in-app advertising and/ or the sale of data obtained in the course of use. • Freemium apps In addition to a free basic version, there is a premium version for a fee, which has additional functionalities and is then also often free of advertising. • Subscription apps Media companies use such an app to offer their content behind a paywall. Often, a few online accesses to the provided content are initially offered free of charge. This is similar to the freemium strategy. • Paid apps These apps can only be purchased from the app store for a fee. • Shopping apps

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These apps support the sale of digital and/or non-digital products and services and are therefore usually offered free of charge, as they function primarily as a further advertising as well as a dialogue channel. In some cases, the relevance of these programmes has led to talk of an app economy. However, it should be noted that downloading an app does not automatically equate to its intensive use. This is also understandable when one considers that over 50% of smartphone users have installed 13 or more apps (cf. Statista, 2020b, p. 21). Since not every app can become an intensively used Pareto app, a high proportion of sleeper apps can be assumed. Food for Thought  Check for yourself which apps you have downloaded but never or hardly ever use! How high is your share of sleeper apps?

In order to support the intensive use of the apps, not only a budget for development and ongoing programme maintenance should be provided when using apps. App providers also need a budget for app marketing. This should not only be related to the launch date, but to the entire life cycle of the app. This is because many apps are not self-­ perpetuating and must be continuously advertised if they do not achieve outstanding relevance for users. The relevance of app marketing results from the fact that 24/7 accessibility is increasingly considered “vital” and more and more people are “always on”. cc

Memory Box  The mobile phone is increasingly becoming a very personal

smart service terminal. For companies, it represents an increasingly important access channel to different target groups.

Another possibility to intensify mobile communication is the QR code. As already explained, QR stands for quick response. The QR code consists of a square matrix and contains data that can be read by software. This is already available for many smartphones and other mobile devices as apps or is already integrated as a function in the camera. If the reader (e.g. smartphone) is pointed at the code and scanned, the software decodes the code. The user is redirected to additional information on a website (cf. Fig. 5.72). The QR code can be used to encode a web address and immediately provide the user with further information or specific offers. After scanning and reading the code, the user may only have to press send on the website to trigger an order. In addition to the web address as a link to specific offers, the code can also contain a telephone number, address or other textual information. To spread the code, it is often used in advertisements, flyers, mailings or on posters. It is also regularly used in newspapers and magazines to make it easier to get in touch. In addition, the QR code can be used to provide further information or trigger direct orders.

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Scanning

Decoding

Website

Fig. 5.72  From QR code to website

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Memory Box  The advantage of the QR code is that it eliminates the error-­ prone and time-consuming (mobile) typing of a web address. This is a real user advantage.

A QR code writer is required to generate the QR code. These are easy to find online (e.g. http://goqr.me/de/). The right holder of the QR code, the Japanese company Denso Wave, has made the specifications of the code publicly available and waived its rights as patent holder. The use of the QR code is thus available to everyone free of charge. The legislator has defined strict rules for the use of instruments of dialogue communication (in particular telephone, e-mail, fax). These must be taken into account both in customer acquisition and in customer care. The rules of the General Data Protection Regulation (GDPR) must also be taken into account. cc

Memory Box  What is often a rule concerning data protection? Everything is forbidden unless it is allowed. Therefore, companies are called upon to obtain permission from their customers to process and use personal data.

The term permission is intended to express that it depends on the decision of the recipient in which way he or she may be addressed. These permissions are required for promotional telephone calls and e-mails. In addition to taking these legal framework conditions into account, the success of dialogue communication goes hand in hand with the creation and maintenance of a prospect and customer database (also known as a CRM database). The tasks of a CRM database include the acquisition, preparation, consolidation, storage, evaluation and updating of data from prospects and customers. This includes address, profile and history data. Based on well-prepared information about the recipients, ideally “more relevant” content can be transmitted – leading to further profitable sales. The major challenge is to bring together the data obtained online and offline in one system. The success of dialogue communication – online and offline – can be evaluated on the basis of several criteria. The advantage over classic communication is that reactions to

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dialogue measures can usually be directly traced back to specific stimuli and associated costs. In the case of a classic advertising campaign, success indicators, such as advertising recall, image, etc., can often only be collected through marketing research. The analysis of the success of dialogue communication focuses on the following criteria: • Response rate Number of people who showed a desired reaction (request for information, opt-in, order, “becoming a fan”, etc.), measured in relation to the total number of people addressed by a campaign as a percentage. Response rate 

Number of responders 100 Total number of persons addressed

The higher the response rate, the better – as long as the response is positive from the company’s point of view. • Order rate Number of people who bought online and/or offline in relation to the total number of people addressed in a promotion, as a percentage. Order rate 

Number of orders 100 Total number of persons addressed

The higher the order rate, the better.

• Return on Sales (ROS) This figure indicates how profitable a turnover is for a company. Here, the profit is usually used for calculation purposes, and the gross margin is used less frequently. The gross margin is calculated by deducting the cost of goods sold from the sales revenue (excluding sales tax). Sales profitability 

Profit or gross margin 100 Turnover

The higher the sales profitability, the better.

• Cost per Interest (CPI) or Cost per Lead (CPL) To determine the CPI, the total costs of a customer acquisition campaign are divided by all prospects acquired (also called leads). This results in the costs per acquired prospect in the case of a multi-stage acquisition of customers. Cost per Interest =

Total costs of a customer acquisition campaign Total number of prospects

The lower the value, the more cost-effective it was to generate a prospect (lead, interest). The decisive factor is whether the prospects acquired can also be won over as customers. After all, prospects only cost money, while sales and – even better – contribution margins can be generated with customers.

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• Cost per Order (CPO) The cost per order shows how much had to be invested to acquire an order. For this purpose, the total costs of an acquisition campaign must be divided by the number of orders triggered. In this way, the costs per order are determined. Cost per Order =

Total costs of the acquisition campaign Total number of orders triggered

The lower the value, the more cost-effective it was to gain an order. This value is to be interpreted meaningfully in connection with the achieved turnover or better with the achieved contribution margin of the order. The loyalty and the customer value achieved over several years should also be taken into account here. • Revenue per Visit/Revenue per Visitor The key figure Revenue per Visit shows how much revenue was generated per website visitor or per website visit in an online shop. It is determined by dividing the total revenue (e.g. of a week or a month) by the number of website visits or website visitors. Revenue per Visit 

Total turnover of the online shop  e.g.one week 

Revenue per Visitor 

Total number of website visits  e.g.one week  Total revenue of the online shop  e.g.one week 

Total number of website visits  e.g.one week 

The higher the value, the better. • Redemption rate Number of people who redeemed a coupon or a value check in relation to the total number of coupons or value checks issued for a promotion, as a percentage. Redemption rate 

Number of redeemers 100 Total number of coupons / value checks issued

The higher the redemption rate, the better.

• Turnover per coupon Average sales made by participating persons when using a coupon. Turnover per coupon =

Total turnover gained througha couponing measure Number of coupons redeemed

The higher the turnover per coupon, the better.

• Cost per Coupon (CPCoupon) Divide the cost of a couponing promotion by all coupons distributed to get the cost per coupon distributed. Cost per Coupon =

Total costs of a couponing campaign Total number of coupons issued

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The lower the cost, the better. • Cost per redemption (CPR) Dividing the promotion costs by all redeemed coupons to determine the cost per redeemed coupon and thus per achieved purchase. Cost per Redemption = The lower the cost, the better.

Total costs of a couponing campaign Total number of coupons redeemed

• Click-through Rate (CTR) The click-through rate for online banners, keyword ads is the number of clicks on an ad (ad clicks) in relation to the number of ads impressions. It is an important criterion for evaluating the advertising impact of various online ads. Click - through Rate 

Ad clicks 100 Ad impressions

In general, the higher the click-through rate, the better.

• Break-even point Determination of the sales volume for a particular dialogue marketing campaign at which the sales revenue generated and the costs of the campaign are equal. At this point, neither a loss nor a profit is generated. If a greater number than that required to reach the break-even point is sold, the company makes a profit (see Sect. 5.1.2.2). • Return on Investment (ROI) In order to determine the profitability in the sense of the return on an investment, the ROI is calculated. For this purpose, the profit achieved is set in relation to the invested capital. Return on Investment 

Profit 100 Invested capital

The higher this value, the more profitable an investment was.

• Return on Marketing Invest (ROMI) In order to determine the profitability in terms of the return on an investment in marketing, the ROMI is calculated. For this purpose, the profit achieved by a specific marketing action is set in relation to the marketing investment. Return on Marketing Invest 

Profit 100 Marketing investment

The higher this value, the more profitable a marketing campaign was.

• Return on Advertising Spend (ROAS) The indicator ROAS is comparable to ROMI. Here, the profitability of an individual advertising measure is determined by putting the profit achieved in relation to the

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advertising costs. It is important to note that turnover instead of profit is often used as a indicator to determine ROAS. This is less meaningful than focusing on profit. After all, not every turnover is profitable – and no company can survive on turnover alone. Return on Advertising Spend 

Profit 100 Advertising costs

The higher this value, the more profitable an advertising campaign was. In addition, further important KPIs can be used for e-mail marketing (cf. Kreutzer, 2021b, pp. 335–386). • Delivery rate The delivery rate indicates how many e-mails were delivered. Delivery rate 

Shipping quantity  bounces 1000 Quantity shipped

The higher this value is, the better the quality of the e-mail addresses used. The delivery rate should be above 95%. Otherwise, the e-mail distribution list should be purged because a low delivery rate is considered a characteristic of SPAM e-mails. • Softbounce/hardbounce Bounces are undeliverable e-mails. The incoming mail server sends an error code to the sender. A distinction is made between temporary undeliverability (softbounce) and permanent undeliverability (hardbounce). Hardbounce rate 

Hardbounce 100 Shipping quantity

Softbounce rate 

Softbounce 100 Shipping quantity



Bounce rates are an indicator of the quality of e-mail addresses – also in the eyes of e-mail marketing service providers. The higher the bounce rates, the poorer the quality of the e-mail addresses used. • Unique open rate The unique open rate shows how many recipients have opened an e-mail. The multiple opening of an e-mail by the same person is not additionally taken into account here. Number of unique openings 

Number of unique openings 100 Delivery quantity

The level of the uniqueness of the open rate says something about the attractiveness of the announced content as well as the attractiveness of the sender in the eyes of the recipients. • Total open rate In the total open rate, multiple openings are also counted in comparison to the uniqueness of the open rate. Therefore, the total open rate can also reach more than 100%.

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Opening rate 

Total number of openings 100 Delivery quantity

High open rates are an indicator of the recipients’ interest in the content presented. Not all e-mail programmes count the multiple opening by a user or more precisely by an IP address. • Click-through Rate (CTR) Click-through rate is determined as the number of all clicks as a percentage of the total number of mailings delivered. Click - through Rate 

Total number of clicks 1000 Delivery volume

The higher this value is, the more interesting the presented content is in the eyes of the recipients. • Clicks per link and average clicks per link rate (also click rate) The clicks per link metric can be used to determine how often each link was clicked. Based on the information obtained in this way, a hit list of the most interesting links and therefore the most interesting content can be created. In this way, an approximation to the interests of the recipients can be made in order to ideally align the information offers more to these expectations. In addition, an average clicks-per-link rate can be determined. For this, the total number of clicks generated by a newsletter is divided by the total number of links in a newsletter. Average clicks - per - link rate = Total number of clicks generated by a newsletter Total number of links in a newsletter

The higher these values are, the more interesting the presented content is in the eyes of the recipient. As the number of clicks increases, the likelihood that the recipient will find something exciting also tends to increase. • Click-to-open Rate (CTRO) Here, the uniques clicks are set in relation to the uniques opens. This determines how many of the openers have also clicked. Click - to - open Rate 

Number of unique clicks 100 Number of unique openings

The higher this value is, the more interesting the presented content is in the eyes of the recipients. • Reading time Reading time indicates how long an e-mail or e-newsletter is viewed.

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Sum of all opening times in seconds 100 Number of openings

Reading time per opener 

Sum of all opening times in seconds 100 Number of unique openings

The higher this value is, the more interesting the content tends to be. However, a long reading time can also be an indicator that the readers did not get along with the content and possible calls-to-action and therefore invested a lot of time in the analysis of the content – without desired result. • Mobile read rate The mobile read rate shows how many readers have accessed an e-mail or e-newsletter on mobile devices. Mobile read rate 

Mobile Openings 1000 Total number of openings

The higher this value is, the more users access the communicated content on the move. The mobile read rate must be taken into account when designing the content. In general, it makes sense to optimize the e-mail templates directly for mobile devices, because the number of mobile accesses is continuously increasing. • Conversion rate Depending on the goals of an e-mail campaign, different conversions can be targeted. These include subscribing to a newsletter, requesting an offer or a catalogue, arranging a meeting, placing an order or visiting a brick-and-mortar store. These conversions are set in relation to the people who clicked on a corresponding link in the email action. Conversion rate 

Number of conversions 100 Number of clicks

The higher this value, the more effective an advertising campaign was. • Double opt-in rate The double opt-in process is essential for legally compliant e-mail permission. This rate makes it possible to determine how many users not only granted a single opt-in, but also clicked on the confirmation link. Double opt - in rate 

Number of doubleopt - ins 100 Number of singleopt - ins

The higher this value, the more convincing the invitation to double opt-in. • Forwarding rate Here it is recorded how many recipients of an e-mail have forwarded it to third parties via a tell-a-friend function.

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Forwarding rate 

Number of forwardings 100 Delivery quantity or number of unique openings

The higher this value is, the more convincing the presented content is in the eyes of the recipients. • SWYN rate (also social sharing rate) Via SWYN links (SWYN stands for “Share with your network”), individual articles from an e-mail or e-newsletter can be offered to the reader for sharing on social networks. How many of these are used is shown by the SWYN rate. SWYN rate 

Clicks on SWYN links 100 Delivery quantity or number of unique openings

The higher this value is, the more convincing the presented content is in the eyes of the recipients. • Response rate The response rate shows how many recipients individually responded to an e-mail or e-newsletter. Response rate 

Number of individual responses 100 Delivery quantity

Which value is aspired here depends on the respective campaign objective. Individual responses also require – mostly cost-intensive – individual responses. • Engagement Rate The engagement rate shows how many recipients in total have responded in one way or another to an e-mail or e-newsletter. Activities can include clicks, shares, downloads, purchases, etc. Engagement rate 

Total number of all activities of the recipients 100 Number of recipients

In sum, a high engagement rate is desired. However, it is primarily about the types of engagement sought. After all, a complaint is also a form of engagement. • Complaint rate Web mailers sometimes return information about which recipients have marked an e-mail as SPAM. These people can be put on a list to be excluded from the next mailing. Complaint rate 

Number of complaints 100 Delivery quantity

The higher this value, the less convincing the content, timing, frequency and/or sender were.

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• Unsubscribe rate With the unsubscribe rate, the unsubscribes from an e-mail distribution list are set in relation to the delivery quantity. Unsubscribe rate 

Number of unsubscribes from the e - mail distribution list 100 Delivery quantity

The higher this value, the less convincing the content, timing, frequency and/or sender were. • Growth rate of the e-mail list The growth rate determines how an e-mail list develops over time. Number of recipients Time 2  Number of recipients Time 1 E - mail growth rate   100 Number of recipients Time 1

The higher the positive value of the list growth rate, the more dynamically the recipient group grows. If the list growth rate is negative, the number of e-mail addresses shrinks. It is important to note here that an e-mail distribution list is not only about quantitative growth, but above all about relevant e-mail addresses (qualitative growth). • Cost per view The cost per view shows how much had to be invested for a single opening. Cost per view =

Total cost of the campaign Number of openings

The lower the value, the more cost-effective an opening was achieved. • Cost per click The cost per click shows how much had to be invested for a single click. Cost per click =

Total cost of the campaign Number of clicks generated

The lower the value, the less expensive a click was.

• Thousand-Contact Price /Cost per Mille (CPM) The thousand-contact price indicates how much had to be invested to reach 1000 people with one approach. CPM 

Total cost of the campaign 100 Number of recipients opening rate

The lower the CPM, the cheaper it was for the sender to reach these recipients. However, these costs alone say nothing about how successful a campaign was. Most of the data needed to determine these indicators will be available after the action is completed and may “only” need to be merged from different systems.

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5  Marketing Tools Memory Box  In the case of dialogue marketing measures, a many success indicators can be determined in order to evaluate the activities. However, you also have to do it!

The increased use of dialogue communication in recent years  – both online and offline – can be attributed to several factors: • By addressing the target persons personally, their perception filters can often be better bypassed. This is particularly successful if the recipients have given permission to be contacted. • The direct approach makes it possible to take historical data into account. Advertising messages that are based on such historical data tend to attract greater attention from the recipient. • The instruments of dialogue communication allow a focused approach to the target group. This means that wasted coverage and the associated costs can be avoided. At the same time, the success rate increases. This requires a convincing acquisition-oriented segmentation. • An immediate response option may also mean a gain in convenience for the person addressed. Offers can be requested or orders placed immediately. A study by the European Marketing Associations shows the importance of the approaches outlined here as well as the following online communication. On the agenda of marketing executives in Europe are currently the top three positions (cf. DMV, 2021, p.  9; n = 635 CMOs, senior marketing executives, marketing board members): • 43.1%: Digital marketing (total) • 34.8%: CRM databases and CRM management • 31.5%: Optimization of marketing expenditure (return on marketing investment)

5.4.3.6 Online Communication With the rapid expansion of the Internet and the continuously increasing number of online users, an important additional field of action has established itself for companies: online marketing. The following figures clearly show why online marketing is an indispensable field of action for virtually every company today (cf. We are social, 2021): • The world population comprised around eight billion people in Q4 2022. • There are 5.27 billion unique mobile users worldwide. This means that more than two-thirds of all people on earth now own a mobile phone. • The number of Internet users increased by 7.6% last year to 4.72 billion. As a result, approximately 60% of the world’s population is now online. • Within 1 year, the number of users on social media platforms increased by more than half a billion. The number of social media users today is 4.33 billion people. This means that more than 50% of the population is on social media. • 76.8% of Internet users aged 14–65 are e-commerce customers.

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Online marketing

Online advertising

Visible to the end user

E- customer loyalty programmes Apps Online PR Viral marketing E-mails E-newsletter Social networks Forums/communities E-commerce Media sharing platforms Online competitions E-coupons Location-based services Microblogging Social bookmarking E-sampling Corporate blogs Messenger services M-coupons

Corporate website

Keyword ads

Unvisible to the end user Search engine optimization (SEO) Search engine advertising (SEA)Web monitoring Affiliate marketing Web analytics Targeting Influencer marketing Rating and review management

Realtime advertising Content marketing

Fig. 5.73  Forms of online marketing

These figures impressively illustrate the great importance of online marketing. Users encounter online marketing in a wide variety of forms (cf. Fig. 5.73; see Kreutzer, 2021b, for more details). The online presence of a company in the form of a corporate website is a particularly important form of online marketing: The homepage as an entry page presents the virtual entrance door to a company. Therefore the corporate website becomes the supporting pillar of online marketing. The corporate website comprises the entirety of a company’s content presented under a URL, i.e. an Internet address (e.g. audi.de). A corporate website can focus on the company itself, its products, its services and/or the respective brands. So-called e-recruiting often takes place there, i.e. the online invitation to apply for a job with a company. In addition, links to the company’s activities in social media (such as Facebook, Twitter, Instagram, Pinterest) or to blogs, social bookmarks and communities can be communicated here. Relevant content for the media can also be found here. Anyone who is on the Internet is also confronted with various forms of online advertising. One of these is banner advertising. Banners are forms of advertising that are integrated into websites in a wide variety of ways. If you use search engines as an online user, you will come across keyword ads. These paid advertisements on search engine results pages are also called sponsored links. In addition, users are confronted daily  – intentionally and unintentionally  – with a multitude of advertising e-mails and e-­newsletters, the receipt of which is usually only partially requested. Another form of online marketing is e-commerce (derived from “electronic commerce”). This refers to the electronic initiation and processing of purchase processes.

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There are also – partly complementary to this – customer loyalty and customer care concepts that also or exclusively take place in online media. If they are implemented only in the online area, these are called e-customer loyalty programmes. If online and offline elements are combined, we speak of hybrid systems. This includes the online and offline presence of a customer magazine such as for me from Procter & Gamble. Many of the loyalty cards in circulation today reward both online and offline purchases, for example Payback, BSW, DeutschlandCard or the MediaMarkt Club. E-coupons try to trigger certain behaviours. E-coupons can be communicated as part of banner advertising to encourage online users to visit the website or subscribe to a newsletter. E-sampling also takes place in the sense of sending a product sample electronically, e.g. in the form of e-books (“electronically available books”). This is intended to motivate users to engage with the corresponding offer. In addition, there are forms of online PR or online public relations that companies use to present themselves and their offerings to the public. In recent years, the importance of social networks (such as Facebook, Pinterest, TikTok, Xing, LinkedIn) has increased significantly. In these, millions of people are networked with each other and form an interesting target group for the advertising industry due to the high density of information about the individuals. In addition, forums and communities can be found on the Internet, which – only partially initiated by companies – offer platforms for a comprehensive exchange of information. Furthermore, social bookmarking services create the possibility of marking interesting websites and informing others about one’s own website preferences (such as digg.com). Via media sharing platforms (such as Instagram, YouTube and SlideShare), it is not only possible to present one’s own creations online. Rather, these platforms also offer companies the opportunity to present themselves through their own videos, presentations and photos. This approach can be particularly successful if the “story behind the story” is presented, e.g. in the form of the “making of” an advertising spot. At the same time, these media sharing platforms are also the field of action of many digital opinion leaders (keyword “influencers”), who cover a wide variety of topics here. Keeping online diaries in the form of blogs is no longer limited to private individuals. Companies are increasingly setting up corporate blogs to inform their own employees as well as external target groups (such as prospects and customers as well as potential employees) about relevant events in the company and to enter into a dialogue with them. These developments are flanked by microblogging services such as Twitter, which companies use for direct communication with their target groups and also to provide services (e.g. Deutsche Bahn or Deutsche Telekom). The term microblogging is derived from the fact that posts on these blogging services are limited to a certain number of characters (e.g. 280 characters on Twitter). Instant messenger services, such as Facebook Messenger, WhatsApp, WeChat and Snapchat, are now becoming increasingly important. These services can be used to send text messages, but also text, image, video and audio files. In addition, location information and contact data can be exchanged between individuals or in groups.

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The possibilities of mobile marketing have already been mentioned (cf. Sect. 5.4.3.5). Location-based services make it possible to tailor messages and offers to the respective location of the user. Apps and the corresponding app marketing are becoming increasingly important here. Mobile coupons can be sent out. In addition, online media also offer an exciting scope for using viral marketing. This is intended to spread advertising messages epidemically on the Internet. Behind the visible forms of online marketing for the end user, there is a second level of fields of action for companies that “play on” these in order to operate their online activities successfully. This includes keyword advertising (also known as search engine advertising or SEA). The results of this are visible to search engine users in the form of keyword ads. Search engine optimization (SEO) activities are visible to searchers in the search engine hit lists. In search engine optimization, companies try to appear in as prominent a position as possible in the so-called “organic listing” of the search engine providers Google, Yahoo!, Bing & Co. in the most prominent position possible through a specific design of their online presence. The activities of affiliate marketing also belong to the online marketing activities that run “in the background”. Through these, one’s own online advertising becomes visible on the websites of third-party companies or also on private websites. This is intended to address a larger target group. A central basis for successful online advertising – which is also not always visible to the user – is the various forms of targeting. For this purpose, e.g. search and surfing behaviour on the Internet is evaluated – sometimes in conjunction with other user data – in order to derive needs profiles as well as product and service interests. These are used as a basis for the placement of online advertising. In online advertising, so-called real-time advertising or real-time bidding (RTB) is increasingly being used. In addition, a variety of analysis options are opening up to companies in order to record not only the behavior of online users, but also the effects of their own online activities. When behavioural data on websites is analysed, this is referred to as web analytics. Click-stream analyses and web tracking are used here. In contrast to web analytics, web monitoring attempts to gain insights into the perception of one’s own offers, one’s own company and its competitors on a meta-level. This meta-level describes a level above the real communication (e.g. between customers and a company). In the case of the “information about information” analysed here, the aim is to distil out particular clusters of praise and complaints, expressed expectations, product suggestions or even trends from the multitude of opinions expressed on the Internet. In essence, the aim is to listen as closely as possible to online users. When monitoring focuses on social media platforms, it is referred to as social media monitoring. In recent years, content marketing has become increasingly important. The content includes sound, text, still and moving images. Content marketing itself is about winning over (potential) customers by presenting exciting content. It consequently offers target persons and target groups informative, advisory and/or entertaining content, which often only has an indirect reference to the company’s range of services.

404

5  Marketing Tools Awareness Inspiration to deal with a brand/company through interesting content

Conversion

Interest

Target persons become customers – triggered by interesting content

Arousing enthusiasm, sympathy and/or interaction through interesting content

Content marketing

Purchase intention Triggering buying impulses through interesting content

Consideration

Creating credibility and trust in brand or company through interesting content

Fig. 5.74  Process of content marketing

Content marketing is often more oriented towards the work of classic media – such as newspapers, magazines, TV and radio – in the preparation of the content presented. The sender of the content sees him- or herself more as an expert, consultant, supporter or entertainer. A purely sales-oriented thinking does not do justice to this approach. Consequently, it is primarily a matter of conveying competence and know-how in selected areas by the companies offering the content. Ultimately, however, the content should also motivate users to take certain actions. These can be purchases or donations to non-profit organizations (cf. Kilian & Kreutzer, 2022; Bürker, 2020; Grunert, 2019; Hilker, 2017; Pulizzi, 2013). Although the content provided does not contain any direct purchase impulse, the intention of content marketing is ultimately geared towards triggering purchases, donations or other forms of engagement to achieve the company’s goals (cf. Fig. 5.74). cc

Memory Box  Brands and companies are becoming publishers themselves in

the course of content marketing. 

Influencer marketing and social influencer management are of great importance today. This refers to the integration of (digital) opinion leaders in order to have them report – ideally positively – about one’s own offers (cf. Kilian & Kreutzer, 2022). The two-step flow model is used here. In the one-step communication model, information is disseminated to the target persons directly via the classic media. In the two-stage communication model, opinion leaders are specifically involved in the information process to the “final” target persons. Since an opinion leader can often reach several people, he or she assumes the function of a multiplier. Thus, this person can create value for the company through positive position

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statements  – or destroy it through negative statements. Influencer marketing is used in particular to increase awareness of a company’s own range of services, to strengthen customer loyalty and to trigger direct purchases. In this context, the so-called digital opinion leaders are of particular importance (cf. Kilian & Kreutzer, 2022; Jahnke, 2021; Kost & Seeger, 2020; Schach & Lommatzsch, 2018). Rating and review management refers to the stimulation, control and use of customer ratings in order to win customers over for one’s own services in the purchase process. Customer ratings focus primarily on the awarding of stars. However, reviews are usually much more meaningful for companies because they provide reasons for the aforementioned ratings. In rating and review management, stimulation refers to motivating as many (satisfied) customers as possible to submit a (positive) rating of the company’s own offers. Control aims to obtain the ratings on the platforms relevant for the company (e.g. Amazon, Holidaycheck or Google). Finally, the use includes the integration of customer reviews into the company’s communication in order to make (positive) reviews visible to as many people as possible. However, many companies still fail today to retain customers through rating and review management at the important Zero Moment of Truth (see Sect. 2.2.3.5). In essence, this is about gaining as many high-quality and positive so-called social signals from customers as possible. These include comments, shares, likes and ratings that can be posted on various platforms. The scope of relevant reviews and ratings begins with the product or service, continues with the brand, the online or offline shop, and the company, to the service providers behind it, and does not end with the app. As Fig. 5.75 shows, rating and review management have an effect on a wide variety of conversions that a company can strive for: from website visits to content downloads, the acquisition of an e-mail permission to store visits (online and offline), which ideally lead to requests, test orders or purchases. The number of app downloads as well as app usage are also promoted by ratings and reviews (cf. Kilian & Kreutzer, 2022). Website visits

Purchase Store visits (online/offline) Comments

Shares

Content download

Rating and review management

Request for quotation

Likes

App usage

Reviews

App downloads

Fig. 5.75  Fields of action and impact of rating and review management

E-mail permission

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Based on these diverse characteristics, online marketing is defined as follows: Online marketing comprises the planning, organization, implementation and control of all market-­ oriented activities that use mobile and/or stationary devices with Internet access to achieve marketing goals. Online marketing uses online instruments both for the marketing of digitalised products and services (e.g. music, text, audio, photo, video) and for the marketing of non-digitalised products and services. In my opinion, it always makes sense to speak of online marketing when it clearly goes beyond communication in general or advertising and several marketing instruments are integrated into a concept. In cases where this is not the case, we should speak more precisely of online communication or online advertising (cf. for further definitions of online marketing and online communication Lammenett, 2021, p.  40 f.; Kreutzer et al., 2020). Viral marketing is a special form of communication on the Internet (see Tusche, 2020; Kreutzer, 2021b, pp. 556–563). This exploits the networking between people through the Internet so that information can spread epidemically on the net and thus like a virus. Viral communication is the implementation of word-of-mouth on the Internet. This can be referred to as word-of-mouse propaganda. The characteristic of viral campaigns is that they spread like wildfire within the (worldwide) user community – usually without much accompanying media input – and thus trigger a snowball effect. This makes the relationship to buzz marketing visible. Companies can aim for different goals with viral marketing. First of all, they can try to make a company, a brand or a specific offer known through this. Virals, which are contents to be communicated virally, can be used for this purpose. These are intended to encourage people to engage with companies, brands, products or services. In addition, an attempt can be made to win over prospects or customers for an offer. Finally, the goal can be to obtain information about the senders and recipients of viral messages within the framework of a viral process, in order to subsequently be able to transmit further messages individually. Viral marketing can be divided into different forms. Random virals are when private individuals or companies develop unplanned content that is picked up by others and widely communicated on the Internet. The viral process is an unplanned “random product”. Placed virals, which are presented on the Internet in a planned manner in order to trigger viral effects, are to be distinguished from this. The key success factors of placed virals are shown in Fig. 5.76. First of all, it must be decided who the source of the viral message should be. This can be the company, selected brands or individual products or services. Then a decision has to be made about the type of seeding or the channels involved. For this purpose, relevant agencies offer their support. For seeding, virals can be presented on the corporate website or as part of affiliate programmes on partner websites. The prerequisite for forwarding corresponding content is that it is interesting, funny or relevant to the user in some other way. For viral marketing, it is crucial to reach a critical mass as quickly as possible in order to trigger the viral effect.

5.4 Communication Policy

407 Type of seeding as well as selection of channels to be included

Source of the viral message (company, brand, product/service)

Forwarding intention

Core of the viral message (added value) and incentives for forwarding

Characteristics of senders and receivers

Fig. 5.76  Factors influencing viral campaigns initiated by companies

E-mail campaigns to your own prospects and customers can also draw attention to content with “viral potential”. Likewise, an own or third-party e-newsletter can be used for seeding. cc

Memory Box  A company can only control to a limited extent whether content

goes “viral”. A viral process itself – for good or bad – can no longer be stopped. Depending on the content, a shitstorm or a roseshower may result!

5.4.3.7 Sponsorship In sponsoring, the supporting company (sponsor) provides a recipient (sponsored person, team or company) with money, goods and/or services. In return, the recipient or the sponsored party undertakes to draw attention to the sponsor’s support through various communication measures. Thus, sponsorship is based on the principle of reciprocity (cf. Homburg, 2020, pp. 911–913). This expected reciprocity clearly distinguishes sponsorship from patronage, in which a patron acts out of disinterested motives and does not demand anything in return for his or her commitment. In sponsorship, the general communication objectives outlined in Sect. 5.4.2 take on a specific form as sponsorship objectives. Depending on the type of sponsorship, it is possible to reach specific target groups (e.g. at concerts and sporting events) in order to increase awareness there. At the same time, this type of commitment aims to influence the corporate image, as companies become involved in environmental issues, culture, sport, etc. and thus document their responsibility beyond their own core business (cf. Sect. 5.4.5.1).

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It is often desired that the positive image of the sponsored party radiates to the sponsor. This desired image transfer can be triggered by an excellent singing performance or a convincing victory in sports. Last, but not least, such sponsorship measures are intended to help generate greater demand for the offers of the sponsor. Sponsoring, like all other communication measures, should directly or indirectly help to achieve this central corporate goal of increasing demand. Depending on the sponsored party, different types of sponsorship can be distinguished: • Cultural sponsorship In cultural sponsoring, the sponsor supports museums, theatres, opera, concerts and exhibitions. Alternatively, cultural projects for photography, film, radio etc. can also be financed. In many cases, such activities would only be able to launch less ambitious programmes without appropriate sponsorship. Deutsche Bank has been a sponsor of the Berlin Philharmonic for many years. Lexus and OMV are general sponsors of the Vienna State Opera. As a result of this collaboration, Lexus is not only extensively involved in the Vienna State Opera’s communications. By sending out the annual programmes internationally, Lexus also gains indirect access to visitor addresses and can thus generate interest in its own range of services. • Sports sponsorship Sports sponsorship involves supporting individual athletes, clubs/teams (e.g. the Bundesliga) or entire events. The range of sponsored events extends from streetball tournaments to Formula 1 races and the Football World Cup. In return for this investment, the sponsoring companies can broadcast advertising spots in the immediate vicinity of broadcasts. At the same time, the sponsor logos are often displayed in the media at the venues. The logos can also often be seen on the sponsor board, which serves as background decoration for important interviews. In addition, sponsors often receive tickets for the events. These can be used as part of event marketing to cultivate relationships with customers, suppliers, cooperation partners and political decision-makers (cf. Sect. 5.4.3.8). A particularly lasting impression can be made on the invitees if services are offered that are not available for money. This includes a visit to the pit lane at Formula 1 as well as talks or photo opportunities with top athletes. A company that fulfills a customer’s childhood dream in this way will be remembered positively for a long time. A special form of sports sponsorship is the (co-)financing of the construction or renovation of sports stadiums with the aim of giving them one’s own company name. This is the case with the Allianz Arena in Munich, the Lanxess Arena in Cologne and the MERKUR SPIEL-ARENA in Düsseldorf. • Environmental sponsoring or eco-sponsoring In environmental or eco-sponsoring, companies get involved in environmental projects. Here, financial resources are made available to the corresponding organizations. Alter-

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natively, independent initiatives can also be launched. In return, the companies can “adorn” themselves with the logos of the supported projects. • Social sponsoring In social sponsoring, companies dedicate themselves to social tasks and problems and try to overcome them through their own commitment or through financial donations. The Bill & Melinda Gates Foundation, founded by Bill Gates, supports health projects in developing countries. In my opinion, this commitment does not belong to sponsoring. The activities of this foundation are not geared towards a return service and therefore count as patronage. • Research sponsoring or scientific sponsoring In research or scientific sponsoring, companies provide financial contributions or scholarships to scientific institutions. The aim is to support research projects. This category also includes endowed chairs and the Deutschlandstipendium. The Deutschlandstipendium supports talented and high-achieving students. In addition to first-class grades, social commitment and special personal achievements of the students are also taken into account when awarding the scholarship (cf. BMBF, 2021). Another example is the Institute for the Future of Work. This is an independent private economic research institute that focuses on the economic analysis of national and international labour markets. It is financially supported by the Deutsche Post Foundation (cf. IZA, 2021). A particular challenge is to record the effects of sponsoring activities on corporate objectives. Due to the often rather indirect, longer-term mechanisms, a comprehensive analysis of success is often difficult to perform.

5.4.3.8 Trade Fairs, Exhibitions, Events and Brand Presentations Trade fairs and exhibitions are temporary events that often take place regularly at specific locations and bring together a large number of suppliers and customers and consequently have a market character (cf. Meffert et al., 2019, pp. 763–766). For customers, such events often offer the best opportunity to gain a comprehensive overview of the market within a short period of time. Suppliers and, if applicable, exhibitors themselves can carry out comprehensive competitor monitoring, because exhibiting companies usually try to publicise new developments and innovations at such events. In addition, one’s own services can be presented face-to-face to many people here and business contacts can be made. In the case of trade fairs and exhibitions, a distinction can be made between fairs for the general public and trade fairs in terms of the target group addressed. The orientation is fluid, as the examples of the Frankfurt Book Fair and the International Motor Show (IAA) show. At both events, a distinction is made between trade visitor days and public days. Personal sales in the sense of advising prospects and customers are of particular importance here (cf. also Sect. 5.3). Further information on trade fairs and exhibitions is provided by AUMA (Association of the German Trade Fair Industry; cf. AUMA, 2021).

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In-house exhibitions are to be distinguished from these public trade fairs and exhibitions. Within the framework of in-house trade fairs, individual companies invite customers, cooperation partners and/or media representatives to put on a show on their own behalf. A particularly exposed example of this is Apple’s annual special events, where exciting innovations are regularly presented. From Steve Jobs, it was then often said, “One more thing …”. With such specific events carried out by individual companies, the transition to events is complete. This is often referred to as event marketing. The dominant goal of such events is often not the direct sale of services, but the establishment of a personal relationship with the event participants. These may not only be customers, but also important decision-makers from other companies, e.g. from cooperation partners. The shared experience, be it a sailing trip, a Formula 1 race, a top-class football match or a joint visit to a Rolling Stones concert, pays dividends for the relationship in the long term and also facilitates later acquisitions. cc

Memory Box  For several years, such invitations have been viewed critically

from a compliance perspective. Compliance in this context does not only mean adherence to legal requirements. Internal company guidelines must also be followed, for example when accepting gifts from business partners. The many ­corruption scandals have been reflected in corresponding guidelines in the companies and now set tight limits on such events.

We speak of brand staging when brands are presented in 3-D concepts. This is usually intended to achieve multidimensional brand management. For this purpose, spaces are created to stage brands. Examples of this are not only the Volkswagen Autostadt and the BMW Welt. These are exhibition, delivery, experience and event locations in Wolfsburg and Munich respectively. The flagship stores described earlier, such as the Nivea House or Nike Town, are also examples of brand staging. Swarovski Kristallwelten, located in Austria, stages “white and colored glass” in a way that turns the products into cult objects. Riedel – The Wine Glass Company is holding a “Sinnfonie – Adventure of Perception” for visitors at its production site in Kufstein to promote the “relevance of the right glass”. Then the glassblowers can be observed at their demanding work. In this way, the price of a mouth-blown Bordeaux Grand Cru glass from the Sommeliers series of € 79 (2022) – per piece – is to be “put in perspective”.

5.4.3.9 Lobbying Lobbying is a specific form of representation of interests, especially towards persons in the political sphere. Members of the government, members of parliament and civil servants are influenced by direct contact or indirectly via the media with regard to their decision-making. Especially the influence of public opinion can have a strong impact on decision-making processes.

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Lobbying can be used to influence legislative procedures. The ban on cigarette advertising, the declaration regulations for chemical substances, the compulsory labelling of genetically modified products, the amendment of the General Data Protection Regulation or the German Supply Chain Act come to mind. The subject may also be the health care reform, in the development of which doctors, pharmacists, patients, pharmaceutical companies, health insurance funds and/or hospitals exert influence from their respective perspectives. Each of these groups in turn has its own interest groups that approach members of the government, members of parliament and other specialists involved in the processes. These interest groups include the ADAC (Allgemeine Deutsche Automobil-Club), the Confederation of German Employers’ Associations (BDA/Bundesvereinigung der Deutschen Arbeitgeberverbände), the German Farmers’ Association, the German Trade Union Confederation, the Hartmannbund, the Federation of German Industries (BDI/ Bundesverband der Deutschen Industrie) and the GDV (Gesamtverband der Deutschen Versicherungswirtschaft) – The German Insurers. Lobbying, which often takes place in the background and should therefore not be counted as public relations work, sometimes has a bad reputation. However, it is a central component of the active participation of various stakeholders in political work. In my opinion, visible partisanship can be accepted if different interest groups exert equal influence and advocate their individual interests by “fair means”. The influence mentioned here is always subject to narrow limits due to the compliance rules already mentioned. “Compliance” can be understood as “adherence to rules” with regard to the observance of laws, but also of specific guidelines within companies. This is intended to ensure a clear distinction between acceptable influence through lobbying on the one hand and bribery that is incompatible with legal and corporate standards on the other.

5.4.4 Communication Budgeting The budgeting process in marketing determines, among other things, which funds are allocated for market research, for the development of products and services, and for communication. The communication budget includes all costs related to the design, production and distribution of communication tools as well as the analysis of the success of the communication. Due to the specific importance of advertising as a core area of communication policy, the following presentation of budgeting is based on advertising. In science, there have been and still are numerous attempts to substantiate advertising budgeting through the use of complex advertising impact models and thus to provide practice with viable concepts. All in all, it must be stated that these attempts have not produced the desired results and, in particular, no comfortable transferability from theory to business practice. Many complex budgeting models fail in practice due to the lack of the necessary data. Or the time required to apply the models is not commensurate with the entrepreneurial possibilities.

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Against this background, we will refrain from presenting such budgeting models. Instead, it will be shown which approaches prevail in practice. These are methods in which the advertising budget is derived either from specific reference figures or from the advertising goals to be achieved. When deriving the advertising budget from specific reference figures, the planned turnover or the turnover realised in the past is often taken as a basis. In concrete terms, this can mean that a company decides to invest 10% of a year’s sales in advertising. This concept is called the percentage-of-sales method. Similarly, the expected profit or profit earned in the past can also be the basis of assessment. The derivation could be that 5% of the previous year’s profit is invested in advertising. However, the percentage-of-sales method encourages procyclical advertising behavior. If a company achieves high sales or profits, advertising investments increase. In the opposite case, they decrease and possibly reinforce a downward movement. This cannot be in the spirit of corporate management because the causal principle – more advertising leads to higher sales or profits  – is turned upside down. Therefore, this method is not recommended. In the competitive parity method, the advertising budget of competitors represents the central reference value. A company can define which advertising pressure should be built up in the competitive environment. The central parameters for this are SoA and SoV: • SoA (Share of Advertising) describes the share of advertising expenditure of a brand or product in the total advertising expenditure of the defined competitive environment as a percentage. • SoV (Share of Voice) indicates the percentage of advertising contacts of a brand or product in relation to the total contacts of the defined environment. Depending on the position achieved, the budget can be set higher, lower or the same in relation to the competitor. It should be noted that the competitive parity method only takes into account the input of advertising (in the amount of the budget used), but not the efficiency and effectiveness with which a budget is used. Therefore, in my opinion, this method is also not useful. The all-you-can-afford method is a similarly inappropriate approach. Here, it is checked internally which budgets are “left over” for advertising. It becomes clear that although this is a simple approach, it neglects any connection between objectives and effects. Furthermore, the all-you-can-afford method ignores the fact that advertising is a central tool for generating turnover and especially profit. Advertising should not and must not be misinterpreted as an instrument for the use of funds. cc

Memory Box  The percentage-of-sales method, the competitive parity

method and the all-you-can-afford method are pragmatic and relatively easy to implement. However, they do not take into account the objectives to be achieved by advertising. Therefore, their application should be avoided.

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The objective-oriented methods attempt to overcome the disadvantages of the budgeting concepts described so far (objective-task method). In the objective-­task method, the advertising budget is derived from defined advertising objectives. An attempt is made to infer the budget required for this from the advertising objectives. The questions are then: • What advertising budget is needed to increase unaided awareness of brand A from 45–49%? • What budget needs to be invested in advertising to achieve sales growth from € 1.5 million this year to € 2.5 million next year in Germany? • What advertising resources will be needed to attract 250 new customers in Italy over the next 6 months? In order to answer these questions, viable hypotheses about the effects of advertising are required. However, these are often not available. Even if hypotheses exist, they are usually based on past experience and cannot necessarily be applied to the future. The limited transferability of past experience to the future may be due to macroeconomic developments, the market entry of new competitors, an increase in media costs, changes in advertising usage behaviour or other preferences of the target group. Nevertheless, every advertising plan should be based on hypotheses so that marketing can do justice to its task as a value creator – and not be denigrated as a value destroyer or cash burner. If such hypotheses are not yet available, they should be derived from previous campaigns. Hypotheses for the planned advertising campaign can also be defined and tested at the end of the campaign. In this way, the knowledge about the advertising effect in one’s own company increases  – and the success of the advertising becomes more convincing. For the application of the objective-task method it is indispensable that especially for marketing and advertising objectives are formulated which precisely define the content, extent as well as the spatial and temporal reference (cf. Sect. 3.2).  Food for Thought  Question which budgeting method is used in your company – and for what reason.

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Memory Box  In addition, the persuasiveness and coherence of the argumentation of the marketing manager “fighting” for the advertising budget still have a particularly high weight in the distribution of budgets. This requires convincing storytelling.

In addition, the experienced manager builds enough “buffer” into his or her planning to be able to achieve the required communication results despite (foreseeable) rounds of cuts.

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5.4.5 Communication Policy Systems 5.4.5.1 Corporate Identity A specific system of communication policy represents the development and creation of a corporate identity (CI; cf. Birkigt & Stadler, 2002; also Dunkl, 2015; Keite, 2019; Beyrow et al., 2018). cc

Memory Box  The creation of a corporate identity represents a frequently aspired corporate goal. Consequently, corporate identity itself is not an instrument of marketing. Rather, various marketing instruments are intended to contribute to the establishment of a corporate identity.

Through various marketing measures, a holistic, self-contained appearance of a company is to be achieved – a corporate identity. Such a corporate identity requires a coherent self-presentation of the company across the most diverse communication channels. The behaviour of the company and its representatives must also be consistent with the desired self-portrayal. The basis and core of a corporate identity is usually a corporate philosophy, which is often concretised in a mission statement and a corporate vision (cf. Sect. 3.3). In sum, when building a corporate identity, the goal is to achieve a cohesive and compelling appearance for the entire company. This includes the following elements: • Images These include still and moving images of products, service delivery, store design, the production area, the research department, the overall corporate architecture, and employees and managers. • Words This includes the CEO’s statements, but above all communication via the various marketing instruments (PR, advertising, sales promotion). • Acts This refers to corporate commitment in the narrower and broader sense as well as the “doing” of all employees and managers. In order to establish a corporate identity, a consistent, positive image of the company should be created. Such an image is the prerequisite for the emergence of a specific corporate personality. The corporate identity in the sense of this cohesive overall appearance is therefore the result of the fields of action shown in Fig. 5.77: corporate behavior, corporate communications and corporate design. The development of a corporate identity is assigned to communication policy here, because all corporate activities are to be evaluated and designed under the communicative aspect. This is based on a comprehensive concept of communication, which also understands the company representatives as communicators and brand ambassadors and includes all types of communication that have an effect on the company internally and externally.

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Corporate behavior

Corporate philosophy

Corporate communications

Corporate design

Fig. 5.77  Fields of action for the development of a corporate identity

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Memory Box  The corporate identity itself is therefore  – as already mentioned – not a communication instrument, but the desired result of a comprehensive, self-contained communicative approach.

Especially large companies have to create an “artificial” corporate personality. After all, in these companies there is no founder or owner as a value-creating factor (anymore) who shapes the entire enterprise with his or her personality. These persons, often the founding fathers of companies, often defined the style and spirit, the values as well as appropriate behaviour for their company. Where can we still recognize the founders or owners as value-creating individuals today? Examples are Steve Jobs at Apple, Jeff Bezos at Amazon, Elon Musk at Tesla and Space X, but also Mark Zuckerberg at Meta. Other examples of founder- or owner-­managed companies are or used to be Erich Sixt at Sixt car rental, Wolfgang Grupp at Trigema, Richard Branson at Virgin or Dietrich Mateschitz at Red Bull. In many cases, the fundamental ideas of the company founders are still effective today, even if the individuals themselves are no longer active. Where this is not the case, the vacuum must be filled by an independent corporate personality. The corporate philosophy contains the values of the company and, derived from them, the desired behaviour patterns of all company representatives. These must be conveyed internally and externally in order to build up a corporate identity. Many companies have anchored their commitment to specific values in corporate social responsibility (CSR), i.e. in the affirmation of corporate responsibility that goes beyond direct customer, employee and supplier relationships and also includes a company’s contribution to the common good (see further Wiesner, 2016; Kreipl, 2020; Stehr & Struve, 2017; Schmitz, 2021). Various instruments and regulations are used in an attempt to ensure corporate behaviour (CB; cf. Fig. 5.77). If a corporate behavior is achieved, then the behavior of all company members is free of contradictions both internally and externally. The behavior is

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based on the company’s self-image, especially its purpose, vision and values. The basis for this is provided by behavioural guidelines, which can be reflected in codes of conduct (CoC) for employees and managers. The corresponding characteristics are illustrated below using the example of an excerpt on leadership behavior from the code of conduct of BASF (cf. BASF, 2021, pp. 4, 15). Our Code of Conduct In an increasingly fast-changing and highly competitive world, it is crucial that we focus on what is really important to us at BASF. Our values – creative, open, responsible and entrepreneurial – support us in this. They serve as a guide for our business actions and remind us what BASF stands for. We are committed to complying with legal regulations and ethical principles. Our Code of Conduct defines the framework to which we as BASF employees must adhere in order to comply with legal and internal regulations. In this way, our Code of Conduct helps to protect the company and each individual employee. Our Code of Conduct serves as a guideline for living our values and commitments throughout the company and anchoring them in all our actions. It helps us make responsible and ethical decisions in critical situations. Only by fully complying with our Code of Conduct and all applicable laws and regulations can we achieve our aspiration to be the world’s leading chemical company and earn the respect and trust of our customers, investors, employees and stakeholders. … Setting an example of integrity – the responsibility of all managers Anchoring BASF’s values in the corporate culture is first and foremost the responsibility of managers. They set the direction – and not just in terms of compliance with rules. Leaders take responsibility, create trust and move forward with courage and optimism even in difficult circumstances. It’s about leading by example, reflecting our values in our own behavior and actions. It must be clear to us: Only the standard we exemplify as leaders is the standard we can expect from our teams and partners. As executives • • • • • •

we accept our responsibilities and model integrity. we act as a role model with regard to compliance with ethical principles. we make sure that behaviours or decisions are always in line with our values. we deal with specific risk factors and discuss them with our teams. we speak up when something doesn’t feel right. we encourage our teams to address questions and concerns openly. As leaders, we ask ourselves the following questions:

• Do I know the most important compliance risks in my area of responsibility and how to deal with them? • Do I listen to my team members when they raise issues? • How do I deal with ethical grey areas – do I discuss such situations with my team and superiors? • Who can I contact with compliance-related concerns?

In order to ensure that the defined guidelines are taken into account in day-to-day business, not only is appropriate controlling required to monitor compliance, but also a sanction

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mechanism if this is not done (cf. Chap. 7). Only the presence of both elements signals to all employees and managers that a code of conduct is not a “PR event”. Corporate communications (CC) strive for internally and externally coherent communication (cf. Fig. 5.77). To this end, all of a company’s communication activities must be coordinated and interlinked. In concrete terms, this means that a company should present itself at a trade fair in the same way as in other online and offline media. The appearance at the POS should have a similar look and feel as the corporate website and should also be oriented towards the same values. At the same time, all measures should contribute to filling the company’s vision with content. cc

Memory Box  The need for integrated communication is due to the fact that these different addresses converge at the target persons. There, these activities should ideally be perceived as a unified whole. Only then can a corporate identity emerge.

The third CI area is corporate design (CD; cf. Fig. 5.77). Corporate design primarily defines the use of design elements. These include font types and sizes, colors, logo, but also the architecture used for company buildings. By defining these design elements, a uniform visual appearance of the entire company is to be achieved. Often, the entirety of the corresponding specifications is available in CD manuals. These manuals define the design of business letters, business cards, company vehicles and buildings. The “rules of the game” for all other types of communicative appearance are also defined there. So-called templates are often used for this purpose. These define the framework conditions for advertisements, brochures, PowerPoint presentations, TV spots, online activities and trade fair appearances. In some cases, corporate wording is also defined in CD manuals. This regulates the way in which a company wishes to communicate linguistically. Which words should appear repeatedly in the corporate language and which should be avoided? In the case of corporate clothing, the aim is to uniform the support staff in order to ensure a consistent appearance here too. The clothing regulations can refer employees in sales rooms or at trade fairs. Anyone who has ever looked in vain for a salesperson in a retail store because the sales personnel were dressed exactly like the customers can see the value of corporate clothing! cc

Memory Box  Colloquially, corporate identity is often – incorrectly – referred to

when only corporate design is meant.

An integrated overall image of the company is intended to build up a sense of “we” internally and thus a corporate culture. This should promote motivation and job satisfaction (cf. Sect. 5.5). In the external relationship, credibility, trust, acceptance and possibly even affection and closeness should be built up for the entire company as well as for all service areas and service providers. At the same time, a corporate identity can contribute

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to the marketing strategies and instruments for the company’s o­ fferings having better effects – because all activities are coordinated with each other. cc

Memory Box  Creating and maintaining a corporate identity is a never-­ ending task. This is because companies and the environment change constantly, and the changes must be met with regard to the desired corporate identity.

5.4.5.2 Customer Loyalty Systems Changes in the market environment can quickly alter prices and technologies, but close relationships can last a lifetime. Regis McKenna, marketing guru of Silicon Valley

For most companies, only a loyal customer base ensures profitable growth. Companies that do not succeed in retaining satisfied customers in the long term have to invest a large part of their marketing budget in customer acquisition. Consequently, the goal of customer loyalty systems is to prolong (profitable) business relationships with consumers or companies. In order to bind customers to a company in the long term, various drivers of customer loyalty can be used. In addition to contractual and technological causes of loyalty, these also include economic incentives and psychological factors, which can be found in Fig. 5.78. The drivers of customer loyalty can also be differentiated according to whether they are based on voluntary or involuntary causes of loyalty. Voluntary causes of loyalty exist

Contractual obligations • 2-year contract for a post-paid mobile phone • Contract for a gym • Credit/leasing agreement • Theatre/opera/newspaper magazine subscriptions

Technological causes of loyalty Use of lenses only at the manufacturer of the camera body • Printer and cartridges only from the same manufacturer • Coffee machine and capsules from a single source (lock-in systems) •

Drivers of

customer Economic causes of loyalty • Loyalty discount (15% discount for long-term customers) • Quantity discount (from 2nd fitness course 10% discount) • Costs of integrating a supplier • Costs of termination of contract (e.g. at the gym)

Fig. 5.78  Drivers of customer loyalty

loyalty

Psychological causes of loyalty • Habitual/customary shopping behaviour • Personal, appreciative support at the POS • Image of the brand/company • Quality of the assortment (depth, width, genre)

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when a customer independently chooses a particular supplier. A convinced buyer of Montblanc or Apple products may choose this brand again and again without being forced to do so. Similarly, if members of a family have been loyal Volkswagen customers for generations, they may not consider any other brand in the purchase decision process. Economic reasons for loyalty can also lead to a customer’s voluntary commitment. This is the case when loyalty to a supplier results in economic benefits (e.g. a loyalty discount or a regular invitation to a “girls’ night” in a fashion store). A convincing assortment (in the eyes of the customers) as well as an appreciative service by the sales staff can also contribute to this voluntary commitment. Those who regularly shop in a neighbourhood store in order to minimise their travel costs also bind themselves voluntarily. The situation is different for contractual and technological causes of tying. Here we tend to deal with involuntary causes of loyalty. A contractual cause of binding is given, if a customer in Germany is interested in a post-paid mobile phone and must enter into a two-year contract commitment. This is also the case if a one-year contract has to be concluded for regular attendance at a gym. Credit or leasing contracts also bind a customer for a certain term, which cannot be shortened or can only be shortened against additional payments (e.g. prepayment penalty in the case of a credit contract). Theatre and opera as well as magazine and newspaper subscriptions also belong to this category. This also includes subscriptions to Amazon Prime, Netflix, and Spotify – in the case of Spotify the paid version. In retail, such subscriptions are used for wine, chocolate, socks or lingerie. A customer usually also has to accept technological ties involuntarily. Leica lenses can only be used with Leica camera bodies. In many cases, only cartridges from the same manufacturer can be used without problems with printers. Sometimes this is also the case with capsule coffee machines. In these cases, we also speak of lock-in systems, because the customer is locked into a solution. Due to the bond thus achieved, the provider – for a limited period of time – ends up in a situation similar to a monopoly, from which a customer can only exit at additional cost. Thus, the buyer can change the brand or the provider; but only to then often “end up” in a new dependency. In connection with these drivers of customer loyalty, we speak of switching barriers. These are sometimes built up quite systematically by companies. Some of these switching barriers can already be created in the product. This is the case with the Leica example as well as with the incompatibility of vacuum cleaner bags from different vacuum cleaner brands. Other switching barriers result from the quality of service. In an eyewear store, for example, optimal style advice is provided, thus binding the customer to this company in the long term. This can succeed even though a cheaper alternative (e.g. Fielmann) is located in the immediate vicinity. Companies can also build switching barriers very specifically by promising loyal customers additional benefits. This is the core of all customer loyalty programmes. These include the concepts of BSW, Payback or the Deutschland Card, all frequent flyer programmes of the airlines and many other company-specific concepts.

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5  Marketing Tools Memory Box  Switching barriers can be deliberately built by a company to motivate customers to be more loyal.

The activities aimed at building s­ witching barriers, through which a customer is to be bound to a company in the long term, represent an integral part of customer relationship management (CRM). CRM is a customer-oriented corporate strategy that aims to establish a systematic, long-term, profitable and individualized management of customer relationships. Since customer loyalty systems are dominantly communication-­ driven, they are presented as a specific communication system (see Kreutzer, 2021a, pp. 71–150; Bruhn, 2016; Bruhn & Homburg, 2017). cc

Memory Box  Customer retention, at its core, is about helping the customer

not have to look for another provider!

Before developing a customer loyalty strategy, it is necessary to work out transparently which customer loyalty targets are being aimed at with the planned measures. Often, the following goals are the focus: • Increasing customer retention – Customer Retention Rate (CRR) To determine the intensity of customer retention, the new customers acquired in the year are subtracted from the number of customers at the end of the year. This value is then divided by the number of customers existing at the beginning of the year and multiplied by 100. CRR 

Number of customersat year - end - new customers this year 100 Number of customersat the beginning of this year

The higher this value, the better the company has succeeded in retaining customers. At a value of 100%, the customer base has remained stable. At values below 100%, previous customers migrate. However, this numerical consideration does not indicate whether the customers at the end of the year are the same as at the beginning of the year. • Increase in purchase frequency (PF) To determine the purchase frequence, the number of purchases within a certain period (usually 1 year) is divided by the number of customers in this period. PF =

Number of purchases in a given period of time Number of customers during this period

In many sectors, purchase frequency is a relatively stable parameter, so that deviations from the “norm” can be interpreted as warning signals (for example, when buying clothing, food, pet food). For other products, seasonality must be taken into account, such as toys or gardening products. However, a high purchase frequency with a low average turnover must be viewed critically if the individual sales (e.g. in the online shop) are accompanied by corresponding

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shipping costs for the company if these costs are not covered by the customers. Consequently, an increase in purchase frequency is not always a desired development. • Increase in average revenue per purchase or Average Order Value (AOV) To determine the average order value, the sales within a certain period (usually 1 year) are divided by the number of customers in this period. AOV =

Sales within a certain period of time Number of customers during this period

A high average turnover is to be seen positively, because per purchase usually also a high added value can be achieved. • Increase of the share of wallet (also share of basket) The share of wallet shows how much of the sales in a particular assortment area are made by a customer at a particular company.



Sales of a customer in a product category with a company in period X 100 Share of wallet  Amount of the total turnover of a customer in the same product category in period X

If a customer invests € 410 at Anson’s and € 75 at Hess Natur from the annual clothing budget of € 750 in 1 year, then Anson’s has achieved a share of wallet of 55% and Hess Natur of 10%. The higher the share of wallet, the better a company has succeeded in inspiring a customer for its own offers. Additional customer loyalty targets are: • Acquisition of information about the customers for a personalization and/or individualization of the approach • Gathering information about customers in order to use this information to acquire new customers (keyword “lead scoring”) • Differentiation from competitors All in all, customer loyalty activities pursue the goal of maintaining business relationships with consumers or companies in the long term and developing them profitably. In this context, it is necessary to clarify which of the above-mentioned goals are the focus. The forms of customer loyalty activities described below should be used as intensively as possible by customers because this is the only way to achieve the loyalty effects. Customer loyalty activities are understood here as all instruments that are used to shape the relationship between the customer and the respective company in such a way that it is sustainable in the long term and, ideally, the customer continuously generates high and profitable sales. For the development of an own customer loyalty strategy the questions shown in Fig. 5.79 have to be answered.

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First, the reference object of customer loyalty – the What? – must be defined. Here, the following objects can represent the starting point of customer loyalty: • individual products (such as Nutella), • a brand (e.g. Audi, Lange & Söhne or Montblanc), • a sales channel (such as a brick-and-mortar store, the KaDeWe department store or the Otto Group’s online shop AboutYou), • a company (such as Douglas, Peek & Cloppenburg, Sinn). In addition, the target groups of the customer loyalty programme – the Who? – should be defined as precisely as possible on the basis of the following questions: • Should all customers of a company be integrated, as is the case with the Payback concept at dm Drogeriemarkt? • Should only selected customers be given special care? • Do customers have to earn special care and rewards through their purchasing behaviour (as in Lufthansa’s Miles & More programme)? • Is the programme aimed at everyone who has registered for it (e.g. in the case of customer loyalty programmes of hotels such as Best Western’s GoldCrownClub)? • Do customers have to pay a contribution in order to receive the benefits of a customer loyalty programme (e.g. Douglas and BSW)? Various concepts can be used to achieve customer loyalty. This is the question: How? The following customer loyalty instruments are particularly important. Their design can often take the form of online and/or offline versions: • Dialogue program

What? Reference object of customer loyalty

Who? Target group of customer loyalty programme

Customer loyalty strategy

With whom? Cooperation approaches to customer loyalty

How? Concept of customer loyalty

Fig. 5.79  Key questions for developing a customer loyalty strategy

5.4 Communication Policy

• • • • • • • •

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Newsletter Customer service center as a contact point for the customers served Trading card/discount card Customer card Loyalty reward programme (e.g. with a reward for sales made) Advantage programme (with own services or also with services of cooperation partners) Customer magazine Events (invitation to fashion shows, girls’ night, gentlemen’s night, preview of new merchandise, invitation to an in-house exhibition, to an industry event, etc.).

In addition, it must also be clarified whether a company can achieve the defined customer loyalty goals alone or rather in cooperation with other partners (cf. Fig. 5.79). This is the question: With whom? Cooperations increase – in addition to the complexity of coordinating with the partners – the budget that can be used and the communicative pressure if 5 or 15 instead of one company advertise the customer loyalty programme. For this purpose, it may even be expedient to jump over one’s own shadow and cooperate with competitors! When developing a convincing customer loyalty concept, the goals of the company as well as the goals of the customers must be considered in equal measure. From a provider-­ oriented perspective, the content for the customers must be designed in such a way that a long-term increase in revenue is achieved. In addition, the goal is often to gather more data about the customers served in order to provide more personalized service. At the same time, a demand-oriented perspective must be considered in programme design, because only this enables long-term success. cc

Memory Box  From the customer’s point of view, the question of the added value of the service programme is quite simple:

What’s in it for me? In addition, a competitive perspective must be adopted. After all, the company needs to know what measures competitors use to retain customers. Competitive intelligence can help avoid inadvertently simply copying competitors’ activities. The additional challenge is to communicate the benefits of the customer loyalty programme in such a striking way that customers can identify the most unique benefits at first glance. After all, hardly any customer is interested in working through a multifaceted manual in order to understand the benefits of a programme. When describing customer loyalty programmes, we speak of earning when a customer can earn points, miles, € amounts or similar through activities. In the case of burning, these credits can be exchanged – usually after reaching minimum values – for rewards, applied as value credits to a subsequent purchase or paid out directly as cash. These options should be carefully considered when developing a customer loyalty programme.

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In my opinion, the entry into a comprehensive customer loyalty programme and in particular the establishment of a customer club should only take place on the basis of a comprehensive strategy and a business plan covering at least two to 3 years. Such concepts are highly visible to the outside world, and many concepts have already failed due to exaggerated expectations regarding the successes to be achieved at high costs (cf. Kreutzer, 2021a, pp. 267–352). cc

Things to Keep

• Communication involves much more than just advertising. • Communication is used to pursue information, influence and control objectives. • Communication focuses on a wide variety of target groups and different fields of information. • There is a multitude of advertising media and advertising material, the use of which in communication campaigns must be designed on the basis of several criteria. • When developing a communication campaign, an inter-media selection, an intramedia selection and an intra-advertising material selection must be carried out for each advertising medium. • Media can be selected based on the characteristics of media quality, media flexibility, media reach and media economics. • The price per thousand allows a comparison of the costs of different media. • Advertising is the dominant form of corporate communication. • Response media, both online and offline, try to get those being addressed to react directly. • Public relations attempts to build trust for a company and its offerings among the public. • Sales promotion aims at a short-term increase in sales. • Direct mail addresses people in a targeted manner and attempts to trigger an immediate response. • A variety of tools can be used in online communication. • Content marketing is an important part of corporate communications. • Influencer marketing is continuously gaining importance. • Every company should operate a rating and review management system. • The various communication activities of a company must be integrated in order to achieve the highest possible positive impact. • The budgeting of communication measures must be based on precise objectives. • Corporate identity is not an instrument, but is established as the result of various measures. • Customer loyalty systems help develop one-time customers into loyal customers.

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Questions to Check Your Level of Knowledge

1. How can communication policy be characterized? 2. What are the steps in the communication planning process? 3. What are the fields of action in communication policy? 4. What are the objectives of communication policy? 5. Which target groups are to be distinguished? 6. What is meant by pull and push strategy in communication? Who uses such strategies and why? 7. What is understood by pull and push communication in the online context? 8. What is the difference between advertising media and advertising material? Give examples of each. 9. What is meant by inter- and intra-media selection? Clarify your statements using examples. Which criteria are used? 10. What is the meaning of intra-advertising material selection? Give examples of this decision situation. 11. What determines media quality and media reach? 12. What criteria affect media flexibility and media economics? 13. How are the different types of 1000-contact price calculated? 14. What is meant by internal and external overlaps? Are they desirable or rather to be avoided? 15. What types of communication strategies can be distinguished with regard to timing? Work out decision-making situations in which individual strategies can be expected to produce better communication successes. 16. What are the functions of IVW, agma, agof, AWA, LAE, b4p and VuMA? Research answers on the Internet. 17. What does multisensory marketing mean? What is its significance? What are companies doing to take this into account? 18. How should communication be designed to build a compelling brand personality? 19. What do the terms ATL and BTL mean? 20. What is meant by advertising? What goals are associated with it? Which instruments can be used? 21. What is an advertising briefing? What specifications are associated with it? 22. What classifications are useful for distinguishing groups of newspapers and magazines? Give examples of each of these different categories by searching the Internet for corresponding titles. 23. What are different ways to advertise in newspapers and magazines? Name their advantages and disadvantages. 24. What is the difference between dialogue and monologue ads? In what context are they used? Find examples of each in newspapers and magazines that you have access to. 25. What is the importance of TV as an advertising medium today and why? 26. What are the different forms of advertising on TV?

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27. How can product placement be recognised? Which legal principles have to be taken into account? 28. What is meant by member-gets-member advertising? 29. What characterizes buzz? How can it be amplified? 30. What is behind the term guerrilla marketing? What examples can you think of? 31. What approach is meant by ambush marketing? What examples are you familiar with? 32. What is behind the term ambient media? What is the significance of this media genre today? 33. What examples of ambient media are you familiar with from your personal environment? 34. What is PR? Which companies use PR with which goal? 35. Which instruments are used for PR? 36. What is meant by sales promotion? Which target groups are distinguished? Which measures can be used for this purpose? 37. Differentiate between the terms direct/dialogue communication and direct/dialogue advertising and clarify the respective differences. 38. What instruments are available in dialogue communication? What are the characteristics that make a communication instrument a dialogue communication instrument? 39. Analyze in your immediate environment which measures of dialogue communication you have encountered in the last few days. 40. What are the different types of telemarketing? What has to be considered when using it? 41. What are the contents of mobile marketing? What is its importance today? 42. What is a QR code? Where is it used today? Generate a QR code with self-defined content. 43. What factors have increased the importance of dialogue communication in recent years? 44. What all belongs to online marketing? 45. Which instruments are distinguished in online communication? When is it appropriate to use which instruments? 46. What is meant by content marketing? What goals does it aim to achieve? What examples of content marketing are you familiar with? 47. What is influencer marketing? What examples do you know? 48. What is behind the term rating and review management? Why is this topic so relevant today? Where have you been asked to submit ratings yourself? 49. What is viral marketing? In which environment is this used and with which goal? 50. What activities are associated with sponsorship? What types can be distinguished? 51. What is the difference between sponsorship and patronage? 52. What goals are associated with sponsorship and what factors affect their achievement? 53. How can fairs and exhibitions be described? Which such events are you familiar with? Research ten different events and work out whether they are aimed at a professional audience or at general public. 54. What is event marketing? Which effects are primarily aimed at here? 55. What is corporate identity? What goals are associated with it? Which target groups do companies have in mind?

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56. Which fields of action are distinguished in corporate identity? How can the implementation of the defined specifications be ensured in the company? 57. What is the basis of a corporate identity? Find the corresponding basics by researching on the Internet. Compare the concepts of Siemens, Bosch and Tchibo. 58. Is there a difference between corporate identity and corporate design  – and if so, what is it? 59. Which specifications are made within the framework of the corporate design? 60. What is corporate communications aiming at and why? How can the underlying goals be achieved? 61. What are the underlying reasons for the growth of various customer loyalty programmes? Which programmes do you know? What distinguishes them? 62. What are the different types of customer loyalty systems? 63. Which target groups should be reached by a customer loyalty programme? 64. What services can a customer loyalty programme include? What importance do you attach to the individual elements?

5.5 Personnel Policy Only those who burn themselves can kindle a fire in others! Aurelius Augustine Learning Objectives

Ability, • to grasp the high importance of personnel policy as part of the marketing diamond • to present the goal of internal branding • to identify tools for the creation of internal branding and the achievement of brand-­oriented behavior • to use different ways of internal communication • to apply concepts for monitoring the achievement of objectives

5.5.1 Plea for the “5th P” in the Marketing Mix The marketing mix today – as shown in Sect. 1.1.3 – is still mainly defined by the “4 Ps” presented in the previous sections. There are only a few approaches, particularly in Englishlanguage literature, that speak of a “5th P” in marketing for “personnel”. Then the focus is often on the service sector, in which employees have always had a special position. In some cases, there are also approaches with “7 Ps”, whereby the other Ps in addition to “personnel” stand for “process” and “physical evidence” or for “packaging” and “positioning”.

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5  Marketing Tools Memory Box  The time is more than ripe to add a “5th P” for personnel policy

to the marketing mix in general and to speak of the marketing diamond. After all, even outside the service sector, employees are becoming increasingly important for achieving a positive customer experience.

In this context, personnel policy refers to corporate measures that help to give managers and employees the same status in the value chain as, for example, product or communications policy. The objectives addressed here can be described with the concept of internal branding (cf. Fig. 5.80). As a holistic management approach, internal branding strives to ensure that a company’s employees and managers not only behave in a highly customer- and sales-oriented manner, but also in a brand-compliant manner. This brand conformity can relate to the corporate brand and/or to individual product or service brands. In order to achieve a brand-oriented behavior, the fields of action of leadership, human resource management and internal communication and supporting systems must be designed in a specific form (cf. Fig. 5.80). This should lead to the emergence of the desired brand-oriented behavior – behaviour that is aligned with brand requirements (cf. Schmidt, 2007; Esch et al., 2014; Tomczak et al., 2012; Kernstock, 2012; Wentzel et al., 2012). It is indispensable to complement the brand orientation with the described customer and sales orientation, which in my opinion is clearly neglected in many approaches. While internal branding thus addresses the management task, brand-oriented behavior represents the result of all internal branding measures and consequently functions as a target variable to be reviewed (cf. Forster et al., 2012, p. 282). cc

Memory Box  The goal of brand-oriented behavior is a uniform presentation

of the brand by the company’s own employees and managers at all customer touchpoints in order to strengthen the success of the brand in the long term.

Goal: brand-oriented behavior

Instruments to build an internal brand Human resource management

Leadership Internal communication

Supporting systems

Fig. 5.80  Concept of internal branding to achieve a brand-oriented behavior

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What are the reasons for integrating personnel into marketing in such a comprehensive sense and consequently for including them in the marketing diamond described in Chap. 1 (cf. Fig. 1.6)? What is the extent of the relationship between the company and its employees or managers today? And why is n­ either a focus on brand orientation nor on customer and sales orientation alone sufficient to achieve a brand-oriented behavior? To answer these questions, we need to look at the extent of employee engagement. This criterion – as Gallup studies have repeatedly shown – decisively determines the success or failure of companies. Gallup (2020a) defines engaged employees as those who are fully involved in their work, deeply committed to their jobs, and enthusiastic about their work. Tracking employee engagement helps companies identify whether their employees are actively engaged in the company’s development or whether they are simply “doing their time.” Consequently, every company should regularly turn its attention to the indispensable key performance indicator “employee engagement”. After all, what good are the most innovative technologies and the allocated marketing budgets if they are not used by employees and managers in the interests of the company? cc

Memory Box  Every day, employees and managers make decisions and take

actions that impact not only the entire workforce, but also the company’s business performance – both positive and negative!

For years, research findings on employee engagement have shown one thing very clearly: Companies with a high level of engaged employees achieve significantly better business results than companies whose employees identify to a lesser degree with the company, its goals and tasks. Similar results are found in all industries, among different company sizes and nationalities, and – quite surprisingly – also in good and bad economic times (cf. Gallup, 2020a). Food for Thought  Dealing with employee engagement is not a fun event that you

only do once every few years – to make employees and managers happy. The misunderstanding of employee engagement could not be greater!

Today, employees and managers are increasingly demanding – quite apart from a good paycheck  – a comprehensible meaning and purpose for their work (keyword “purpose”; cf. Sect. 3.3). They also want to be seen and appreciated in their uniqueness. And they expect sustainable relationships – especially with their managers. All employees want to be perceived for what makes them unique. The above factors drive employee engagement to a great extent. Gallup (2020a) has found that managers or team leaders alone are responsible for 70% of the variance in the engagement of the teams they supervise!

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5  Marketing Tools Memory Box  Through their behaviour, managers have the greatest influence

on employee engagement – and thus also on the company’s overall results!

Against this background, the paradigm shift in personnel ­management shown in Fig. 5.81 must be taken into account when designing personnel policy – in close exchange with the personnel department (cf. Gallup, 2020a). A paradigm is a fundamental way of thinking. Paradigm also stands for an explanatory model, a prejudice, or, overarchingly, our worldview or outlook. Simply put, a paradigm describes how facts are taken as given. Food for Thought  Check which paradigms underlie your active personnel man-

agement (as a manager) and your passive personnel management (as an employee). Can you see any changes over time? What employee engagement findings have Gallup’s (2020a) studies amazingly consistently delivered over the decades? • Nearly 85% of employees worldwide have little or no employee engagement. • Only 15% of employees show a high level of employee engagement. cc

Memory Box  One of the most important potentials for increasing corporate performance is still not exploited in most companies: the potential of the own employees and managers.

A look at the statements on the determination of employee engagement by Gallup (2019, p. 3) shows where personnel policy can and should start. These statements reveal what – and often how little – actually needs to be done to significantly increase employee motivation: In the past

In the present

My salary check

My meaning of my work

My contentment

My development

My boss My annual performance review My weaknesses My job Fig. 5.81  Paradigm shift in personnel management

My coach My regular reviews My strengths My life

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1. I know what is expected of me at work. 2. I have the materials and equipment I need to do my job right. 3. Every day at work I have the opportunity to do what I do best 4. I have received recognition or praise for good work in the last 7 days. 5. My supervisor or someone else at work cares about me as a person. 6. There is someone at work who encourages me in my development. 7. At work, my opinions seem to count. 8. The mission/purpose of my company make me feel that my work is important. 9. My associates/fellow employees are committed to doing quality work. 10. I have a very good friend at work. 11. In the last 6 months, someone in the company has spoken to me about my progress. 12. During the last year I have had opportunities to learn and grow at work. Figure 5.82 shows which needs the contents of the aforementioned statements pay into a pyramid of needs. In this pyramid, a distinction is made between basic needs and the needs for support, teamwork and growth (cf. Gallup, 2019, p. 3). Gallup has reformulated these statements into questions. By answering these questions, the status quo of employee engagement in the company can be determined. The use of these questions in a company requires Gallup’s approval. Only by meeting the needs behind these statements can a company create an environment of trust and support. What is the state of employee engagement in Germany today? To determine this value, Gallup surveyed 1000 employees in 2019. The following results are representative of the workforce in Germany aged 18 and over. The values shown in Fig. 5.83 can be used as benchmarks for your own company’s results. As in previous years, only 15% of employees in Germany show a high level of emotional commitment. A low emotional attachment is present in 69% – and 16% show no emotional attachment (cf. Gallup, 2019, p. 5)!

Growth

12. During the last year I have had 11. In the last six months, opportunities to learn and grow at work. someone in the company has spoken to me about my progress. 7. At work, my opinions seem to count.

Teamwork

Management support

Basic needs

8. The mission/purpose of my company make me feel that my work is important.

9. My associates/fellow 10. I have a very good friend employees are committed to at work. doing quality work. 3. Every day at work I have the 4. I have received recognition opportunity to do what I do best. or praise for good work in the last seven days. 5. My supervisor or someone 6. There is someone at work else at work cares about me who encourages me in my as a person. development. 1. I know what is expected of me at work.

Fig. 5.82  Placing the Gallup questions in a pyramid of needs

2. I have the materials and equipment I need to do my job right.

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Projected on the workforce: 5,933 million people … 16 people have

15 people 5,562 million people have a

strong

no

Out of 100 employees in an average German company …

Projected on the workforce:

…

emotional commitment

…

emotional commitment

69 people have a

Projected on the workforce: 25,585 million people

low

emotional commitment

Fig. 5.83  Results on employee engagement in Germany

It is astonishing that this data – published year after year – does not trigger an outcry in the management floors of companies and a variety of measures to raise the potential that lies dormant here. Gallup (2019, p. 7) estimates that the economic costs due to internal resignation in Germany amount to between € 105 and € 122 billion. It is interesting and frightening at the same time that nothing has changed in these values for Germany – in good as well as in bad phases of the economy. As if the companies and their managers do not care about these results at all! Gallup’s 10th meta-analysis of employee engagement (2020b) reveals the other negative effects associated with low engagement scores among their own employees. For this purpose, a large number of Gallup studies from 54 industries, in 96 countries, at 276 organizations with a total of 112,312 business/work units and 2,708,538 employees were analyzed. When comparing employee engagement in the top quartile (“Top 25%”) of companies to engagement in the bottom quartile (“Worst 25%”), Gallup found that business units and teams at the median had the following differences on important KPIs. Unlike the mean, the median is the central value, which is exactly “in the middle” when you sort the metrics by size. Reduction of negative events: • • • • • •

81% less absenteeism 18% less fluctuation in companies with a fluctuation rate of more than 40% 43% less fluctuation at companies with a fluctuation rate of 40% and less 28% less theft/loss 64% fewer accidents 41% less quality defects

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Improvements in positive events: • 10% increase in customer loyalty or customer engagement • 14% increase in manufacturing productivity • 18% increase in sales productivity Increasing the success of the company: • 23% higher profitability • 66% higher well-being of employees • 13% higher engagement in society In sum, it can be stated that in highly engaged teams, significantly fewer negative events occur and significant improvements occur in various functional areas as well as at the company level as a whole. cc

Memory Box  Every company is called upon to leverage the great growth potential that comes with increasing employee engagement in their own company. This does not require new technologies or a new IT system. What is required, however, is a comprehensive further development of the mindset of managers! The figures show that the investments to be made here can pay off to a high degree – for all sides!

Against this background, it becomes understandable why it is not only worthwhile in human terms to see employees as more than just an expensive production factor. If companies are striving for strategic development and differentiation from competitors in order to achieve sustainable and profitable growth, employees and managers can no longer be neglected as a success factor. After all, they must fill the strategic orientation and the values on which it is based with life on a daily basis. At the same time, due to the increasing importance of services, employees are providing an ever larger share of corporate value added. Figure 5.84 shows how the share of the economic sectors in total employment has changed. Finally, the established industrial nations are increasingly developing into service societies. This trend reached a new peak in Germany in 2020. The share of the service sector in the total employment of all economic sectors in Germany increased continuously since 1920 from 32.5% to 74.7% in 2020 (cf. Statista, 2021k). In parallel, employment in agriculture and forestry decreased from 24.6% to 1.3% in the period 1950–2020. In the manufacturing sector, the share of employees decreased from 42.9% to 24% in the same period. This development means nothing other than that employees and managers are becoming increasingly important as a central resource in the company. Personnel is becoming increasingly important for the value creation process at the customer. The first result of this development is the need for personnel to have both a customer and a sales orientation (cf. Fig.  5.85). A customer orientation with the sole aim of ­“making the customers happy” falls short for profit-oriented companies. This customer orientation must be brought into balance with the sales orientation. This sales orientation

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100%

Secondary sector: manufacturing industry

Tertiary sector: services and others

90% 80%

32.5% 34.4% 38.3% 40.1%

45.1%

70%

51% 53.8% 57.5% 59.9%

Share

60% 50% 40%

42.9%

47.1%

30%

47.9%

49.2%

46.5%

20% 10% 0%

24.6%

18.5%

42.4%

41.1%

38.1% 36.6%

65.8% 69.6% 72.6% 73.9% 74.1% 74.5% 74.5% 74.7%

32%

28.5% 25.7% 24.5% 24.4% 24.1% 24.1% 24%

13.7% 10.7% 8.4% 6.6% 5.1% 4.4% 3.5% 2.3% 1.9% 1.7% 1.6% 1.5% 1.4% 1.3% 1.3% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2018 2019 2020

Fig. 5.84  Share of economic sectors in total employment in Germany – 1950–2020

Sales orientation

Customer orientation

Fig. 5.85  Ensuring a balance between sales and customer orientation among employees and managers

is about enabling profitable growth for the company. Therefore, all measures provided in the context of personnel policy must be analysed to see whether they contribute to the targets of the company. Another factor that reinforces the relevance of internal branding is the increasing need to differentiate an offer in the face of increasingly similar offerings through service quality (cf. Haller & Wissing, 2020, pp. 64–67). Consequently, it is time to add a concept to the starting points for achieving uniqueness in the market discussed in Sect. 3.4.2.3: the Unique Passion Proposition (UPP; cf. Fig. 5.86). A Unique Passion Proposition attempts to enhance the offering, be it a brand, a specific product or a service, in the eyes of the customer in a specific way. To this end, the passion of the people involved should become visible and tangible. It may even be possible to align an entire company as “passion-driven”. The distinction between the Unique Passion Proposition and the Unique Selling Proposition is achieved by the fact that no facts and figures can be used to document the

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Unique Selling Proposition

Profiling

Unique Advertising Proposition

Unique Passion Proposition

Fig. 5.86  Starting points for achieving uniqueness

superiority of the UPP.  The Unique Passion Proposition is primarily about the “spirit” behind a service offering. In this respect, a UPP is also much more than an UAP, which is created solely through communication without access to objectively verifiable facts (cf. Sect. 3.4.2.3). If this spirit becomes visible for the prospects and customers, then his or her purchase decision can be positively influenced by it – according to the slogan: When employees go to such lengths for their company, their brand, their product - it must be something!

This can reduce uncertainty in the purchase process. However, a Unique Passion Proposition is only achieved when it becomes clear in the eyes of the target group that there is a passionate approach behind a company, a brand or a service, which can be concretized in various dimensions: • Passion to provide excellent service to the customer! • Passion to have the best product or the best service on the market and to continuously develop it further! • Passion to “go the extra mile” for the customer! • Passion for never resting on one’s laurels, but being spurred on by successes to achieve new ones! It is important here that this passion is “real” and not just imposed because the employer wants it to be. Consequently, it is about the passion to achieve marketing excellence for the entire company (cf. Fig. 5.87; further Kobjoll, 2009). Many companies will only be successful in the coming years if they trim their organization to passion and fill all the fields shown in the marketing excellence turbine with equal passion. It will become apparent that even companies whose marketing strategies or offerings are less innovative than those of their competitors can be more successful. The prerequisite for this is that the strategic concepts are implemented convincingly across all company hierarchies and the integrated partners and reach the customers as a passion-driven organization.

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Omni channel

Mass customization Innovation management

Integrated communication

Marketing status quo

Customer retention Analysis of status quo

Customer proximity Employee integration

Implementation

Marketing excellence

Fig. 5.87  Passion-driven marketing excellence turbine

Brand orientation

Brand-orientated behavior Customer orientation

Employee orientation

Fig. 5.88  Cornerstones of brand-oriented behavior

cc

Memory Box  The only thing that cannot be copied by competitors, even in the long term, are the relationships that a company, and especially its managers and employees, build with customers.

By focusing on the “passion” factor, companies can build a solid foundation to achieve long-term uniqueness via the Unique Selling Proposition. That this can only succeed with motivated employees is obvious! However, it is indispensable to align the passion to be aroused with the brand promise of the company or the respective offers and thus to channel it. Therefore, customer and sales orientation must be supplemented by brand orientation (cf. Fig. 5.88). Only this triad leads to the desired brand-oriented behavior: a behavior of managers and employees

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that in its entirety contributes to the success of the company. In order to achieve this, the instruments shown in Fig. 5.80 must be used systematically and in a goal-oriented manner. A general need to deal with the strategic resource of employees more comprehensively than before also results from globalization and the all-pervasive digitalization. It has never been as important as it is today to build a learning organization in order to successfully master the comprehensive, sometimes disruptive developments (cf. Kreutzer, 2022). Against this background, personnel development must establish itself as a service provider for competence development – for managers and employees alike. Parallel to this, managers also have an important task. It is and remains their non-delegable ­responsibility – albeit even more so than before – to systematically support and accompany the employees entrusted to them in developing and expanding their respective competencies. The dynamics of competence development to be mastered in the coming years are illustrated by the developments described below: • Hundreds of thousands of employees now perform functions that did not exist 20 years ago: 3-D artists, app developers, big data analysts, CDOs (Chief Digital Officers), cloud architects, cloud service managers, community managers, content managers, data scientists, feelgood managers, AI programmers, mobile developers, Scrum masters, SEO specialists (SEO stands for Search Engine Optimization), social media managers, VEO specialists (VEO stands for Voice Engine Optimization), UX designers (UX stands for user experience), etc. • Accordingly, about 70% of today’s students will be working in jobs that do not currently exist. • Ten years from now, employees and managers will be working with technologies that are not yet operational today. • In some cases, the teams will have to solve problems that have not been encountered before. cc

Memory Box  The half-life of knowledge is getting shorter and shorter!

Even today, many companies are desperately trying to find suitably qualified staff on the market because the in-house development of such skills has not been promoted in the past, or not sufficiently so. It is therefore a core task of human resources policy to identify – and close – the strategic qualification gap in the company shown in Fig. 5.89. By developing a (digital) teaching and learning agenda in the company, a re-­ qualifying process is initiated in order to systematically close the strategic qualification gap. For this purpose, offers for re-skilling and up-skilling are to be developed. Re-skilling refreshes existing skills. Up-skilling imparts more advanced skills. In parallel, the challenge for all employees and managers is to empower themselves for further qualification. “Lifelong learning” has long been considered a guiding idea, but never before has it been as important as it is today! Education and training in the industrial nations and in every company require a strategic reorientation and further development in order to meet the requirements associated with the digital transformation.

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Re-qualifying (re-skilling, up-skilling)

Qualifying

Kindergarten

School

Apprenticeship/ bachelor's degree

Possibly master's degree/ master craftsman degree

Employment

Age: To 6-7

to 16-18

to 20-22

to 24-26

to 67 & more

Strategic qualification gap Fig. 5.89  Strategic qualification gap

cc

Memory Box  We have to integrate learning into our everyday life and at the same time build up self-learning competence.

Food for Thought  The first semester students of today will retire around the year 2070. By then, they will have to master a multitude of challenges that we do not yet know about today! As John F. Kennedy so aptly put it: There is only one thing more expensive than education in the long run: no education.

5.5.2 Concept for the Creation of Internal Branding 5.5.2.1 Basic Considerations The dominant focus of marketing science and practice is still “outward-facing marketing”. Among other things, this involves the pricing strategy, the product design, the selected sales formats and, above all, the instruments of communication policy. The dominant goal is often to get convincing marketing ideas into the market quickly and faster than the competitors. Online media have significantly increased this pressure to react as quickly as possible – preferably even in real time. Those who act first can often attract the attention of the masses (cf. Kreutzer, 2021b; Lammenett, 2021).

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This means that a central key to corporate success – the comprehensive involvement of the company’s own managers and employees – is still being neglected. It is important to realize that brands are not only shaped and cultivated by marketing communication and the products and services themselves, but also by the behavior of the personnel in direct customer contact. This is especially true for service brands  – but not only for them. Consequently, the customer experience and therefore the customer satisfaction is determined to a large extent by the behavior of sales and service staff. In addition, it must be taken into account that all good ideas must be “managed” in terms of processes by companies and consequently by people. The encounters with customers at all customer touchpoints must be designed with the brand in mind – whether at the POS or in the customer service center. The challenge is to further develop these customer touchpoints into customer trustpoints (cf. Peppers & Rogers, 2012). cc

Memory Box  “Trust” is becoming an increasingly important currency in marketing, in management – and life in general.

Companies therefore need employees and managers who act as brand ambassadors and convince through brand identity-compliant behavior. This can be achieved by building up an internal branding. Successful internal branding is demonstrated by the brand-oriented behavior of all company representatives. Strong brands are always created from the inside out  – never the other way around (Schmidt, 2007, p. 224).

Through brand-oriented behavior as the central content of internal branding, several goals are aimed at (cf. Schmidt, 2007, p. 88; Burmann et al., 2018, pp. 80–89). • The potentials of managers and employees are to be activated holistically and aligned with the achievement of corporate and brand goals. • The identification of the workforce with the company, the corporate brand and any existing sub-brands is to be strengthened. • A consistent and credible appearance of the company and its representatives, both internally and externally, is to be ensured. • The achievement of a high level of trust in the company and brand(s) is to be guaranteed by a consistent overall impression among the relevant stakeholders. The process of building internal branding can be done according to the SIIR model (cf. Esch et al., 2005, p. 995 f.). Using the four phases of sensitising, involving, integrating and realising, the desired brand-oriented behavior can be built up step by step in the company (cf. Fig. 5.90).

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Sensitising  Make brand identity known  Create awareness of the value of the brand  Increase awareness regarding the need for brand behavior

Involving  Communicate topic to top management  Involve managers from the relevant departments  Jointly develop the need for action  "Turn those affected into those involved”

Realising

Integrating

 Implement process together with employees at all levels  Install brand workshops  Set up brand idea pool  Launch lighthouse projects  Document and communicate "best practice" cases

 Implementation of the proposals in the individual departments  Develop targets or target agreements  Use achieved results to finetune measures  Guiding principle: start internal communication before external communication

Fig. 5.90  SIIR model of a brand-oriented change process

In the SIIR model for anchoring brand-oriented behavior, the instruments presented below  – leadership, human resources management, internal communication, and other supporting systems – are used.

5.5.2.2 Leadership Motivated employees who act as brand ambassadors cannot be “bought in”, but must be developed within the company. Consequently, a convincing brand-oriented behavior does not emerge on its own, but requires a permanent process for its establishment and development. The responsibility for this lies with the management of each company. Therefore, it is an important challenge to overcome the often in different departments anchored and thus organizationally separated responsibility for customers on the one hand and employees on the other hand in a constructive cooperation. An integrated approach should also break down the information silos that often still exist. In order to achieve overarching cooperation within the company, appropriate guiding principles and visions for the company must first be defined. For this purpose, the existing corporate values may also need to be further developed and a purpose for the entire company developed. cc

Memory Box  The central challenge here is: Start with the why! 

Every company should provide compelling answers to the “Why?” question (see Fig. 5.91; cf. Sinek, 2011; Ritter & Chim, 2019, p. 2). In essence, this is about the purpose of the company and the question Why?: Why do we exist as a company? The vision is derived from this corporate purpose. This is about the strategies and the business processes and thus about the core activities of a company

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441 Purpose: Why do you do what you do? What´s the purpose? This is about the meaning and purpose of a company, about why it exists! Vision: How do you do what you do?

Why? How?

This is about the strategies and the processes and thus about the core business of a company! Mission: What do you do? This is about the products and services that a company offers.

What? Fig. 5.91  Start with the “Why”!

(question of How?). Finally, the mission can be used to describe the outcomes to be achieved (question of What?). It is crucial that purpose, vision and mission are intensively linked and form a consistent unit. This unity of effects is an indispensable prerequisite for the purpose to actually achieve the required identity, identification and mobilization functions – as an indispensable element for a brand-oriented behavior (cf. Kreutzer, 2021c). Purpose, vision, and mission must not just be wall decorations on the executive floors, but must become the guiding image for all managers and employees of the company. To this end, it is essential that top management works toward the implementation of the purpose – in a way that everyone can experience – and that the entire incentive structure of the company is derived from the defined purpose. This means that the company’s monetary and non-monetary incentives are linked to results that are helpful and necessary on the way to implementing the purpose (cf. on purpose in marketing Kilian & Miklis, 2020, pp. 21–45). The specifications mentioned in Sect. 5.5.1 can provide a further basis for this. These are to be cast in standards which define rules of conduct and management styles and provide management tools (cf. Fig. 5.92). Figure 5.92 shows the starting point for the creation of brand-oriented behavior. This is formed by the purpose of the company as well as the vision and mission. The defined corporate values and guiding principles also describe the desired framework for action. From this, norms are then derived which are to shape rules of conduct, management styles and management tools. The process of cultural change required for this in the company is only ensured if the achievement of the corresponding goals is also anchored with great weight in the bonus agreements of managers. Because it is true: Even a brilliant strategy fails if it is not supported by the corporate culture. cc

Memory Box    Culture eats strategy for breakfast.

Peter Drucker

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Purpose of the company (vision, mission, values, guiding principles)

Standards (Rules of conduct, leadership styles, leadership tools)

Behavioral pattern in terms of brand-oriented behavior Fig. 5.92  Instruments for building brand-oriented behavior

In the context of internal branding, two leadership styles are particularly relevant (cf. Kreutzer, 2022; Scholz, 2014, pp. 1077–1199): • the transactional leadership style • the transformational leadership style A leadership style comprises all the actions and behaviours with which a manager confronts his or her employees and which he or she uses to achieve certain results. In the transactional leadership style, leadership takes place in the sense of an exchange process or trade between managers and employees (cf. Fig. 5.93; cf. Morhart et al., 2012, p. 398). Here, the focus is on individual transactions. The underlying principle of the transactional leadership style is: do ut des (“I give so that you give.”). The supervisor defines expectations and goals, while employees receive something in return in the form of a reward if they achieve them. Emphasis is placed on goal setting against which employee performance is measured at regular intervals. This style, known as management by objectives, is often supplemented by management by exception, in which the supervisor only intervenes in the event of serious deviations from targets. Companies that rely on a transactional management style set standards for how employees should behave. This makes it unmistakably clear which tasks and behaviours are expected of them. Depending on performance, corresponding positive or negative consequences are to be expected (cf. the upper course in Fig. 5.93). Companies that rely on a transactional management style specify standards of behaviour with regard to internal branding as to how employees are to behave as brand ambassadors (cf. Morhart et  al., 2012, p. 392). The transformational leadership style focuses on transformations in service delivery (cf. the lower course in Fig. 5.93). This involves processes of change and transformation.

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Transactional leadership („exchange oriented“)    

Conditional reward Guidance through control Management by objectives Employees as an “object” that needs to be steered

Transformational leadership („change oriented “)    

Inspiring motivation Intellectual stimulation Individual support Employee is integrated as a “subject” into the process

Supporting employee behaviour

Extrinsic motivation

 Ensuring conduct in conformity with the company  Compliance with and implementation of standards

Strengthening employee behaviour

Intrinsic motivation

 Team development  Independent contributions to the solution desired  Greater openness to crosscutting cooperation

Fig. 5.93  Impacts of transactional and transformational leadership

The transformational leadership style concentrates on the “soft” factors and uses the insight that employees can also be motivated by the prospect of self-fulfilment (cf. Fig. 5.82). The transformational leadership style aims to transform employees’ needs and goals so that they put their own interests behind the company’s targets. Consequently, managers and employees do not face each other as opponents, but as supporters in the pursuit of the common target, which is derived from the overarching purpose of the company. This is achieved above all by managers who communicate an attractive and meaningful purpose, act as role models themselves and actively support the development of employees. Experience has shown that if employees are placed at the center of the transformation process, a higher affective, i.e. emotion-based loyalty to the company and its brands can be achieved than with a management style that only focuses on the processing of narrowly defined tasks (cf. Kreutzer, 2022). For efficient internal branding, a mixed form of the models is suitable in order to combine the advantages of both approaches (cf. Fig. 5.93). Through components of transactional leadership, brand-compliant behavior can be forced to a certain degree and thus behavioral standards can be ensured in all areas of a company. However, specifications and guidelines should only be emphasised to such an extent that the components of transformational leadership can have an additional effect. The manager must succeed in triggering brand commitment, identification and self-motivation through the “soft” factors of transformational leadership. In this context, regular appreciation of employees plays an important role in internal branding. Studies have shown that appreciation by superiors and colleagues effectively promotes the willingness to perform and motivation of employees (see also the Gallup results in Sect. 5.5.1; Ellingsen & Johannesson, 2007; Brockhoff & Panreck, 2016). Appreciation and performance demand can therefore not be seen in contradiction to each other. Rather, value creation should be linked to appreciation, since praise and recog-

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nition are important factors for employee satisfaction. After all, everyone has intrinsic needs for social recognition, affiliation and appreciation for the services rendered (cf. Fig. 5.82). Recognition builds up and at the same time stimulates ambition to maintain, if not exceed, one’s own performance. Employees reciprocate appreciation by contributing to the success of the company and are more willing and motivated to perform (cf. Scholz, 2014, pp. 1077–1199, on motivation theory). These criteria also underlie the Gallup studies cited. The conclusion: With appreciation to value creation. In this context, empowerment is of great importance. Empowerment is understood as creating or increasing the scope for action and decision-making powers of employees in their daily work. Employees should not only orient themselves to their job roles, but should also develop solutions to problems on their own initiative, depending on the situation at hand. Employees can only do this if they are given the necessary room for action. In this case, they do not have to have every interaction signed off by their supervisor (see Kreutzer, 2022). Instead, appropriately supported employees (“enabled employees”) are empowered to make decisions independently within the framework of their area of responsibility. Employees are empowered by the creation of freedom to participate creatively in the achievement of brand goals. The expansion of action competencies goes hand in hand with an expansion of the field of tasks in the direction of more demanding tasks, which in turn can have a positive effect on the employees’ motivation to work (cf. Brexendorf et al., 2012, p. 349). This can lead to an increase in brand commitment, greater enthusiasm and improved workflows at customer touchpoints (cf. Esch & Knörle, 2012, p.  376). Studies in this regard show a positive correlation between empowerment and brand-oriented behavior (cf. Henkel et al., 2012a, b). cc

Memory Box  Empowerment is always to be adapted to the respective situation. On the one hand, not every employee can cope with a high degree of freedom. On the other hand, many standardized task areas are rather unsuitable for empowerment.  The challenge here is: situational leadership!

Brand citizenship behavior makes an important contribution to the development of brand-oriented behavior. This concept was derived from the organizational citizenship behavior. The latter describes individual and voluntary behaviors that lie outside of role expectations and thus belong to the “non-enforceable functional extra-role behavior”. These are not directly or explicitly sanctioned by the formal reward systems of companies, but nevertheless contribute greatly to the performance enhancement of organizations. The

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management of a company has to ensure that such behavioural patterns can prevail in the company. The transformational leadership style and empowerment can make a decisive contribution to this. Brand citizenship behaviour in the sense of “brand citizenship” comprises various generic, i.e. brand- and industry-independent, behaviours of employees that underpin the development of a brand identity and that are to be supported by appropriate leadership behaviour (cf. Thompson, 2017). The dimensions characterised in Fig.  5.94 can be counted among these (cf. Burmann & Zeplin, 2005, p. 119). The following guiding ideas for the appropriate leadership culture can be derived from these contents: • Appreciation • Information (see Sect. 5.5.2.4) • Dialogue (see Sect. 5.5.2.4) Appreciation and thus respectful treatment of employees is not a matter of course in corporate practice. The interaction in the company, whether on one hierarchical level or between different hierarchical levels, is often still far away from appreciative interaction. Moody superiors, new employees that no one expected on their first day at work, or information about upcoming site closures that affected employees have to glean from the daily press are examples of this (see further Sutton, 2009, 2013; Brockhoff & Panreck, 2016). The lack of identification with the company, which is regularly diagnosed in Gallup studies, finds its causes here (cf. Sect. 5.5.1). Corresponding communication problems also frequently head the lists of issues that hinder employees in their daily work.

Willingness to help

 Positive attitude, friendliness, support and empathy towards internal and external inquirers.  Examples: assuming responsibility also for tasks outside one's own area of responsibility in order to ensure brandcompliant behavior (in the case of complaints, grievances, dialogues in social media)

Brands awareness

 Comprehensive consideration of brand-related behavioral guidelines.  Examples: consideration of the impact of statements and behaviors on the brand in all situations, i.e. also in those without observation, monitoring, sanctioning (in private surroundings, in social media)

Brands initiative Teamspirit Brand missioning Self development Brand development

 Special commitment to brand-related activities that goes beyond what is demanded or expected by internal or external customers ("to go the extra mile").  Examples: working overtime to complete a customer order on time or to conclude a customer dialogue in an appreciative manner; passion with which solutions are sought  No complaining about difficulties and onerous duties of engagement for the brand, if the brand's performance is supported by it.  Examples: clear intention to continue commitment to the brand even if opportunity costs are high (if there is not much administrative support for customer projects)  Recommending the brand to third parties – even in non-work environments and passing on the brand identity to new employees.  Examples: promotion of own brand among friends or assumption of a brand-related role as mentor for new employees; use of products with brand attributes in private environments  Willingness to continuously develop brand-related knowledge, skills and abilities in order to best implement brand performance.  Examples: voluntary participation in appropriate trainings, participation in workshop in order to continuously reinvent or develop the brand  Contributing to the further development of the brand identity by integrating internal and external impulses into the brand process  Examples: forwarding customer feedback to relevant departments, developing innovative ideas that advance the brand; clear commitment to go beyond "doing things by the book"

Fig. 5.94  Characteristics of the brand citizenship behavior

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Influencing factors: - Appreciation - Information - Dialogue

Level of commitment

Achievement potential

Fig. 5.95  Iceberg model of performance

Appreciation is also expressed through an interest in people and not just in the top performer. Demanding performance and treating employees with appreciation only appears to be a contradiction. The causality is reversed. Appreciation has a major impact on willingness to perform and motivation, but not on performance potential, which is influenced by other factors. The relationship becomes clear in the iceberg model of performance (cf. Fig. 5.95). In this iceberg model of performance, reference is made to the findings of Herzberg (1993), who investigated the conditions for the emergence of satisfaction or dissatisfaction in working people. He distinguished the following factors: • Motivators (satisfiers) Motivators directly lead to job satisfaction. These include, first of all, the work or performance by oneself, but also the recognition of performance by others. The responsibility assumed and the opportunity for advancement and self-fulfilment also contribute to job satisfaction. • Hygiene factors (dissatisfiers) The non-fulfillment of the so-called hygiene factors leads to dissatisfaction. If hygiene factors are fulfilled, however, this alone does not create satisfaction. Hygiene factors include working conditions, the quality of relationships with managers, employees and peers, as well as the status achieved, job security and salary. Despite some criticism of this approach by Herzberg, the central findings can be a guideline for the development of internal branding (see Scholz, 2014, pp.  1082–1086). However, there is still a great need for action with regard to the leadership culture required for this (cf. Malik, 2019, for further details). The human resources management presented below makes a decisive contribution to achieving a high performance potential among employees and managers. At the same time, the measures described there must ensure that suitable personnel are employed in the company.

5.5.2.3 Human Resources Management Human resources management must also be geared towards achieving brand-oriented behavior (cf. Bruhn et al., 2019, pp. 729–778). This applies in particular to areas in which managers and employees are in direct contact with customers. Therefore, the following

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questions need to be clarified already in the hiring process in addition to other job requirements: • Do the applicants have the ability to meet the set requirements regarding the implementation of an internal branding? • Do the employees have the necessary motivation to fulfil their function as brand ambassadors? The question of the competence of (potential) employees must already be asked and answered in the course of their selection and training. These core questions must also be answered in the case of promotions or transfers of employees and managers to other – especially customer-oriented – areas of the company. In particular, it must be determined which basic orientation the respective persons bring with them. In this context, it should be noted that when analyzing a relationship between business partners, a distinction must be made between two levels: • Factual level The focus in relationship building is still often placed wrongly on the factual level. This is based on the erroneous assumption that dialogues are primarily about numbers, data, facts and factual qualifications. Customers – offline as well as online – can hardly be inspired by this alone. In fact, this is less successful because offers have become interchangeable. • Relationship level With interchangeable offers, the relationship level becomes critical to success. Then it’s all about what kind of human relationship can be built. And this type of relationship contributes to sales success to an ever greater extent. Despite these results, the design of customer-oriented processes itself is often still dominated by the factual level. However, even in business life, a platonic relationship is rarely established purely on the factual level (“from head to head”). Because here too, the customer – whether as a consumer or as a representative of a company – is always looking for good feelings. Therefore, the relationship level (“from heart to heart”) must be taken into account in all transactions with customers (cf. Fig. 5.96). It is even true that the relationship level generally dominates the dialogue balance: This means that conversations are continued with those providers who especially fulfil the (unspoken) expectations on the relationship level. Therefore, one should know them or explore them empathically – i.e. with empathy! An exemplary analysis of the areas of responsibility in a customer service center shows that the overwhelming majority of the services provided there are on the relationship level and not – as is perhaps often assumed – on the factual level. If employees concentrate too much on the factual level, the dialogue may unintentionally become unbalanced and a business relationship will not be established. In order to avoid this, at least equal attention should be paid to the factors of the factual and relationship levels shown in Fig. 5.97. In some cases, however, the relationship level in particular needs to be strengthened, because this has been neglected in many companies to date.

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Factual level Topics, rules, facts, tasks, targets

Relationship level Conflicts, emotions, values, fears, norms, habits, desires, dislikes

Often the relationship dominates the dialogue outcome! Fig. 5.96  Dialogue is to be established on two levels Factors of the relationship level Factors of the factual level

Price details Quantity details Terms of delivery Technical specifications of product/service  General terms and conditions

   

 Tonality of communication  Appreciation in dealing with each other  Willingness to listen  Individualization of the offer (i.e. focus on specific questions)  Overall impression of cover letter, feedback, response, offer  Speed of response  Design of the follow-up  Relevant recommendations and hints beyond the requested offer

Fig. 5.97  Factors of the factual and relationship level

Many areas of interaction, which at first glance would be attributed to the factual level, actually pay more to the relationship level through the appreciation expressed. These include the tone in dealing with each other, the perceived appreciation, which is also reflected in the individualisation of the offer and the speed of processing (cf. Fig. 5.97). In contrast, factors such as price and quantity, delivery conditions and technical specifications have a dominant effect on the factual level. Only if all service providers are comprehensively sensitized to both aspects can the desired brand-oriented behavior be achieved. It quickly becomes clear to the customer – or better: “he/she feels quickly” – whether he or she is currently in a dialogue with a customer orientation muffle, an arrogant

Customer-oriented behavior

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The arrogant person

The truly customer-oriented person

The customer orientation muffle

The unpolished person

Customer-oriented attitude

Fig. 5.98  Portfolio for the analysis of the customer orientation of employees

person, an unpolished person or a really customer oriented person. Figure 5.98 shows that a customer-oriented attitude and a customer-oriented behaviour are equally relevant for a real customer orientation (cf. Homburg, 2011; Homburg & Stock-Homburg, 2012). cc

Memory Box  When filling customer-oriented positions – especially in sales,

consulting and the customer service center – special attention should be paid to customer-oriented attitudes and a willingness to behave in a customer-­ oriented manner. These aspects are of great importance in the B2C market as well as in the B2B market.

In addition, it can be seen that some people have an inherently higher congruence between their own identity and the brand identity than other people. In this context, it is referred to as a high person-­brand fit (cf. Esch & Strödter, 2012). The task of human resource management is therefore to ensure that the “right” applicants are recruited and preferentially promoted. These are primarily those individuals whose personal identity corresponds most closely to the brand identity (cf. Esch et al., 2012). Such an approach consistently aligns human resource management with brand requirements. Companies should therefore focus on their brand values as part of employer branding as early as possible in the recruiting process. Even a job advertisement that clearly expresses the brand’s values makes it clear which behaviors and personality traits are expected of future managers and employees. Furthermore, assessment centers tailored to the brand and corresponding case studies in the job interview support the selection of applicants with the highest personal-brand fit (cf. Esch et al., 2012, p. 172 f.). Likewise, company socialization, if it is consistently aligned with the brand, makes an independent contribution with regard to the goal of turning employees into brand ambassadors. Brand-related training, workshops, mentoring programmes or internal brand campaigns are efficient instruments for building brand-oriented behavior.

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Brand-specific training and workshops in particular offer a threefold effect: they promote knowledge about the brand, enable learning of the skills necessary for brand-­ specific action, and support getting to know each other as well as the exchange of experiences between individual employees. This in turn can promote emotional bonding and thus commitment to the employer (cf. Esch et al., 2012, pp. 173–177). In the course of the changes in market conditions and the much-cited “war for talents”, employer branding is of great importance. The German Employer Branding Academy (Deutsche Employer Branding Akademie, 2021) defines its corresponding task as follows: We make employers more successful by identifying the core of their identity, making it tangible internally and externally, and empowering them to align with it to secure their future.

A convincing employer brand is achieved through the use of various internal and external communication tools. In addition to social media channels (e.g. blogs and a commitment on LinkedIn or Xing), public relations, advertising and, above all, personal dialogue are used. The result should be an employer brand that offers two advantages: • An attractive employer finds it easier to attract and retain qualified employees and managers. • An attractive employer brand has an identity-forming and motivating effect. Internal branding and employer branding thus mutually condition and promote each other and can only develop their full effect as part of a holistic brand management (cf. Forster et  al., 2012; Schumacher & Geschwill, 2013; von Walter & Kremmel, 2016; Kanning, 2017). By pursuing both concepts in one company, a particularly high person-brand fit can be ensured: The best and most suitable managers and employees are attracted, retained and motivated to live the brand. As has already been shown, knowledge and skills alone are not sufficient for the emergence of brand-oriented behavior. Employees and managers must also be willing to ­perform accordingly. Consciously designed rewards as a central element of the incentive systems have an effect on the willingness to perform and promote employee motivation. The behavior-influencing stimulus can take both tangible and intangible form and is granted if the staff performs as desired or above average. Material incentives include variable bonuses, profit-sharing, a company car or a company pension scheme. Intangible incentives include, above all, personal opportunities to shape the workplace, personal development opportunities, job security, status symbols and awards. Flexible working hours, childcare, health promotion, leisure activities, sabbaticals and other opportunities to achieve a work-life balance are also important incentives today to promote employee satisfaction. In addition to positive incentives, however, negative incentives also play a role through the cancellation of benefits or the discontinuation of training measures if behaviour does not conform to the brand. However, it is questionable whether such negative incentives will lead to the desired change in behaviour among unmotivated employees.

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Memory Box A sophisticated incentive system makes it unmistakably clear to all employees which behaviours are in line with the brand and desired in the company. 

Internal incentive systems thus have an important activating, controlling, informing and changing function in the internal branding process.

5.5.2.4 Internal Communication In the SIIR model (cf. Fig. 5.90), it became apparent how important internal communication is. However, this is not only understood as a cascade-like provision of information from top to bottom. The concept of internal communication required to build up an ­internal branding goes far beyond this and, among other things, also triggers dialogic communication. This dialogical communication is intended to ensure continuous feedback for management from all relevant areas of the company. The targets of internal communication are defined as derived from the corporate goals (cf. Bruhn et al., 2019, pp. 720–729, 778–781). This includes, first of all, the provision of the information needed for the tasks of each employee and manager. Additional information about the overall purpose of the company as well as an exchange of information between the different levels and areas of the company not only promote the desired brand, customer and sales orientation. This information also promotes employee satisfaction (cf. Huck-Sandhu, 2016). For the subsequent implementation, the following internal communication tasks need to be addressed: • • • • • • •

Segmentation of employees and managers with regard to their information needs Selection of the appropriate communication channels Development of feedback mechanisms Fixing the communicative focal points Selection of the communication times Definition of control points Setting of the budget amount

It is crucial that the entire process of internal communication is critically accompanied. The goal of a comprehensive mobilization of the company’s internal efficiency reserves cannot be achieved by installing this concept once. Therefore, a critical review of the following questions is necessary on a regular basis: • Are the information channels offered used at all by the relevant target groups? • Is sufficient attention being paid to the changing information needs of the different target groups? • Is sufficient use made of the opportunity to provide feedback? • Does the information provided contribute to the customer, sales and brand orientation of the own workforce? • Does internal communication have a positive effect on employee satisfaction?

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When it comes to information, it’s all about the big picture. Here, it is primarily a matter of finding answers to the question of where the company should develop and what purpose it is aiming for. The quote from Antoine de Saint-Exupéry can be used as a guide here: If you want to build a ship, don’t drum up men to get wood, assign tasks, and divide the work, but teach them to long for the wide, endless sea.

The achievement of ambitious goals will increase with motivating communication in the company if it succeeds in taking as many managers and employees as possible “along for the ride”. This is also a central prerequisite for promoting and facilitating the digital transformation that is necessary in all companies today (cf. on change management Kreutzer, 2018, 2022, pp. 499–530). The dialogue itself is geared more to the operational level and is intended to ensure that the company’s internal processes are running correctly. Informational communication primarily creates transparency and can lead to a commitment in the sense of a self-­ commitment to the company. Motivational communication (in the form of praise and recognition and the delegation of responsibility) has a direct effect on motivation and thus on commitment (cf. Fig. 5.99). Whereas in the past it was always said: “The profit lies in procurement”, in view of the findings presented it can be countered: “The profit lies in the employee!” On the one hand, cost optimization – and not only on the procurement side – has been consistently implemented in recent years. On the other hand, in view of the increasing shift to the service sector, the share of labor costs is rising in many industries. Therefore, it is necessary to activate the untapped employee potential in many areas through internal communication. First of all, a strategic information flow must be established in the company. The strategic guidelines are among the central information contents in a company. These are to be comprehensively communicated by the top management for the purpose of goal

Informationoriented communication Motivationoriented communication

Transparency Commitment

Motivation

Fig. 5.99  Impact chain of internal communication

Performance of the whole company

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orientation for the managers and the employees. Among other things, this involves the following areas: • • • • • • • • • • • •

What is the company’s purpose in the age of digitalization? What vision and what mission does the company want to implement? What purpose is at the heart of this? What contribution can the company make in the context of sustainability? In which fields would the company like to be active in the future – and in which not? What sales and earnings targets is the company aiming for in the next few years? From which competitors does the company want to differentiate itself? What importance is attached to innovation, product and/or service quality? Which brand values are the focus? Which customer experience should be created? What service goals have you set? How comprehensively and with what tonality does the company want to present itself in social media?

The provision of such information enables a basic orientation and motivation of the employees. If this information is not provided top-down, there is a risk that divisional or departmental goals are defined that do not or not sufficiently contribute to the overall goals of the company – due to a strategic information vacuum. A study by StepStone and Kienbaum (cf. StepStone, 2017, p.  2) in Germany shows which tasks still need to be mastered. A total of 14,317 people were surveyed for this purpose: 50% skilled workers, 40% managers and 10% other employees. The majority of the analysed companies employed 101 to 500 employees (19%). 16% employed no more than 50 employees and another 14% reported 1001–5000 employees. The majority of the companies (28%) achieved an annual turnover of € 10–100 million. What were the key findings of this study? • 25% of the skilled workers in Germany do not know the goals of their company. • Approximately 20% of managers with personnel responsibility are unaware of the company’s overall objectives. • However, 80% of professionals want to know how their work fits into their employer’s overall strategy. • 70% say they need a clear understanding of their role in the company in order to be productive. Additionally, the study also shows:

The more transparent the corporate strategy, the more satisfied the employees are.

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Professionals who know the overarching goals of their employer are significantly more satisfied with their work than those who do not understand the big picture. This is stated in the study by Walter Jochmann, Managing Director of Kienbaum (StepStone, 2017): Communicating their corporate strategy internally is a major challenge for many organizations. But it is worth investing time and effort to communicate the strategic objectives and their importance for the daily work of each employee in an open and understandable way. Employees are motivated by a fulfilling job and an appreciation of their own contribution to the company’s success. They want to understand strategic directions and help shape their practical implementation.

When it comes to the internal communication of brand-related content, the German Brand Monitor (Deutscher Markenmonitor, 2019) reveals further challenges. These are based on a survey of 287 decision-makers in German companies. The following shows the percentages of decision-makers who would like to see the brand have a greater influence on various corporate functions: • • • • • •

Customer service: 58.9 Distribution: 58.2 Product development: 52.6 Human resources: 44.9 Management: 44.6 Marketing: 35.2

Here, it becomes apparent how important brand-related communication has been so far – and where there is still a need for optimisation. In many cases, the impact chain of internal communication does not yet function as a powerful link between purpose, vision, mission, company values, corporate strategy, brand values and everyday work. With such information deficits, both the development of brand-oriented behavior and the creation of a corporate identity are bound to fail. It has already been pointed out that convincing brands grow from the inside out. Since employees represent a particularly important brand touchpoint, internal brand management must not remain the sole task of marketing – it is a task of management as a whole. The necessary information cascade must therefore begin at the highest hierarchical level. The company has a multitude of possibilities to satisfy the information needs of the employees. In my opinion, this is not a matter of the employees having to fetch the information, but of the management having to bring it to the employees. In addition to “strategic communication”, dialogic communication must also be established in the company. In order to achieve a high level of employee motivation, informational involvement in customer and brand-oriented measures must take place at an early stage. Only then will increasingly well-informed customers meet equally well-informed employees – be it in field service assignments, at the POS or in the customer service center. To this end, it is best to inform employees about appropriate activities even before the customer does.

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Providing information to the company’s own employees at an early stage is a prerequisite for building brand-oriented behavior and enabling the company to achieve superior service quality. This is based on the following objective: Customers who are well informed by the company should meet employees who are at least as well informed.

As today’s customer becomes more informed, the need for such information increases significantly. Therefore, in the course of dialogic communication, a comprehensive supply of information to all departments that are also customer touchpoints must be ensured (cf. Fig. 5.100). Simply pointing out that all information relevant to the departments concerned is available on the intranet and the Internet is not really helpful. The marketing department must always provide incentives so that the employees also deal with this content which is relevant for customer contact. In addition, in many companies there are not only cognitive firewalls between the managers, employees or the respective departments, but even downright information silos. Then it can happen that the customer is still not only the first, but often also the only one to recognize such communication problems. However, this “realization” and especially the experience associated with it can have a negative impact on the company and brand image. In order to ensure the necessary internal flow of information, instruments for company-­wide communication as well as instruments of personal communication are suitable. The development and use of such instruments is a expression of appreciation for the company’s employees and managers. They experience first-hand that resources are made available to meet their information needs. The central characteristics as well as instruments of communication can be found in Fig. 5.101. Selected instruments are discussed in more detail below. Customer service center PR department

Technical customer service

Marketing department R&D department

IT department POS

Fig. 5.100  Design of dialogical communication in the company

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Characteristics

Communication via different media at spatial or temporal distance



Person-to-person communication

Low contact intensity





High contact intensity



No/only digital distance between sender and receiver

Top-down:



Discussions with the supervisor and colleagues

Speeches by management/the board of directors (townhall meetings)



Feedback discussions



Employee newspaper/employee magazine



Trainings/workshops/conferences



Intranet



Employee events

Software for teamwork (MS Teams, Slack)





Company celebrations (summer parties, Christmas parties)



Notices on bulletin boards, posters



Mentoring programs



Newsletters, mailings, newsletters



Working groups/project groups



E-mails, e-mail newsletters



Brand academy



Brochures/image brochures



Instruments

Personal communication





Business TV, YouTube channel



Company and employee blogs



Brand manual (brand book), brand card



Hang-out/video conference/webinar



Facebook groups

Bottom-up:

Advantages

Conclusion



Employee surveys



Internal complaint management



Company suggestion scheme



Company communities



Company and employee blogs



Fast and comprehensive accessibility – even in internationally active companies



Generally higher involvement of the participants



More cost-effective concepts



Possibility of direct feedback



Often shorter lead times



In some cases, direct monitoring of success possible



Suitable for building brand knowledge and awareness



Applicable for the in-depth development of brand understanding



Can be used to regularly inform employees and managers



Can be used to promote a positive attitude towards the brand

Fig. 5.101  Instruments of internal communication

The intranet, mailings, e-mail, e-mail newsletters and/or employee newsletters can be used to report, among other things, which research priorities are being set and which strategic goals are being pursued. Information can be provided on which customers the company works for. Departments and/or subsidiaries can introduce themselves and new products or services can be presented. New or long-time employees can have their say. The management can comment on various topics from the company’s everyday life every 6 months within the scope of employee events – today called townhall meetings. Dialogic communication can be continued via Twitter, Facebook, webinars as well as company and employee blogs and team software solutions. Through their use, managers and employees at all hierarchical levels can exchange information about their work, new products and other topics. cc

Memory Box  Internal communication promotes the development of a “we” feeling. In addition, pride in one’s own company can develop and identification with the company’s goals and tasks can be strengthened. These effects support the development of a corporate identity. 

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In addition – as already mentioned – knowledge about the brand is a necessary condition for the emergence of brand-compliant behaviour. A distinction can be made here between brand knowledge in the broader and narrower sense (cf. Wentzel et al., 2012): • Brand knowledge in the broader sense Brand knowledge in the broader sense refers to the employees’ general knowledge about the brand. This involves knowledge about the values, the targets and the most important identity components of the brand. However, such general knowledge is not sufficient for the consistent development of internal branding. The elements of the identity must additionally be translated into behaviors in the employee context. • Brand knowledge in the narrower sense Brand knowledge in the narrower sense refers to the action-oriented knowledge of how to implement the brand identity in brand-compliant behavior. Every employee with customer contact should know exactly how the defined brand values are to be implemented in the encounter with customers. Brand knowledge in the broader and narrower sense can be provided via a brand book. This defines the most important characteristics of the brand identity. In addition, standards and guidelines for the implementation of the brand identity in everyday work can be laid down. Some companies also use so-called brand cards for this purpose. In addition to the corporate philosophy, these also document the dimensions of the brand core, the brand style and calls to action. If the employees have these brand cards “on hand”, the values of the brands and clues for implementation are ideally always present. Storytelling is a modern instrument of internal and external communication (cf. Moesslang, 2020; Eckert, 2021). A told story binds the listener so that he or she not only hears the content, but can also experience it and thus emotionally empathize with it. Narratives can trigger the cognitive process called transportation. Transportation describes an immersion of the listener in the story (cf. Green & Brock, 2000, p. 701). The recipient is “transported into” and “emotionally involved” in the narrative moment. This has the advantage of increasing the emotional involvement and at the same time the willingness to learn compared to other forms of communication. The narrated knowledge is more likely to be understood and accepted. Brand stories can be used in companies to convey traditions and values in a vivid, exciting and creative way. At the same time, such stories show how the brand values can be applied and implemented in everyday business life. As a result, stories have two central functions (cf. Wentzel et al., 2012, p. 429): • Prescriptive function Prescriptive means “setting standards”. Here, for example, the relevant values of the company and the brand are defined. • Descriptive function The story provides a description of the way in which values can be lived out in concrete terms.

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5  Marketing Tools Memory Box    A good story can be found with anybody; the receptionist, the

product developer or the bookkeeper (Fog et al., 2005, p. 99).

Through stories in which different employees appear, the most diverse employees of a company can find themselves again. For internal branding, storytelling therefore represents a particularly interesting instrument, because storytelling fulfils several tasks in internal branding (cf. Brexendorf et al., 2012). Storytelling • promotes and imparts brand knowledge, • stimulates thought processes, • expands the repertoire of brand-compliant behaviors, • promotes a unity of knowledge and action, • conveys norms and values and • strengthens the self-commitment to the company. Storytelling can have a significant impact on employee behavior (Fog et al., 2005, p. 21): A strong brand builds on clearly defined values, while a good story communicates those values in a language easily understood by all of us. A strong brand exists based on its emotional ties to the consumer or employee, while a good story speaks to our emotions and bonds people together. Ultimately, storytelling has the power to strengthen a brand both internally and externally.

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Memory Box  Storytelling is a powerful instrument of internal  – and

external – communication.

A brand academy is of central importance in the communication of brand values. This is a space where the brand is staged by the company itself with regard to all relevant senses. There, the brand can literally be seen, heard, tasted, felt and smelled. In addition to conveying ­knowledge about the brand, a dominant goal is to inspire enthusiasm for it on all sensory levels. This concept of installing brand experiences in rooms is implemented in the form of the Dr. Oetker World in Bielefeld, the World of Coca-Cola in Atlanta, the Volkswagen Autostadt in Wolfsburg and the BMW World in Munich. Depending on the respective design, these stagings of the brand are only open to the company’s own employees and managers, or also to external service partners and/or the entire interested general public.

5.5.2.5 Supporting Internal Branding Systems Internal systems must also be aligned with the achievement of brand-oriented behavior. These enable employees to meet the requirements defined in a brand-oriented manner. Therefore, the question to be answered is whether employees receive the support necessary to demonstrate brand-oriented behavior? After all, the employee’s knowledge of the customer solution offered is not enough if the necessary steps cannot be taken by the employees because the company does not provide the required systems.

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Consequently, for the emergence of brand-compliant employee behavior, not only a consonance of knowledge, commitment and ability is necessary, but also support through the supporting systems. Every company is well advised to analyze its own organization and the employees working in it with regard to the existence of the necessary conditions for achieving internal branding. If service orientation has been defined as a central component of the brand values, it is necessary to examine, which systems are available to the employees in the customer service center to achieve this. After all, even a highly motivated and well-trained employee is bound to fail if he or she cannot recognize which offer has been made to a customer. In contrast, an employee who is provided with further information to support the decision-­making at the beginning of a case can act in a completely different way. This can refer to a next best offer or a next product to buy. In this case, the employee in contact with the customer receives an indication of which offer has the highest probability of being concluded with this customer based on analyses and should therefore be submitted. Information for the employee – based on the customer value – can also indicate the possibility of a generous goodwill grant. A good CRM system can also direct the employee to ask the customer for a few more details in the ongoing dialog to round out the information profile (cf. Kreutzer, 2021a, pp. 85–101). A more advanced concept provides employees with a dashboard for customer care. Such a dashboard leads to the quick identification of appropriate customer-oriented trends and actions in order to react adequately. The cross-sell potential, but also the loyalty and reference potential can be identified and displayed to the service employee for the conversation with the individual customer. cc

Memory Box  At all internal customer touchpoints, the employees working

there must be provided with the information necessary for brand-oriented action.

5.5.2.6 Impact Analysis of Internal Branding In order to tap into the internal efficiency reserve of employees and ensure lasting brand-­ oriented behavior, a company must also have the relevant control information. To this end, the relevant goals must be defined and measurement criteria established, with the help of which critical changes among employees can be identified. Since the achievement of brand-oriented behavior is primarily a psychological target value, the result cannot be measured directly in terms of key business figures. In order to consider different perspectives at the same time when recording the effects of internal branding, the balanced scorecard already described is suitable. There, the relevant goals are to be considered in the employee perspective of the balanced scorecard (see Sect. 3.5.2). The balanced scorecard can also be used to communicate these goals within the company. In order to obtain the relevant information regarding the employee perspective, periodically conducted employee surveys, mystery shopping assignments and customer surveys are suitable. Here, the experienced service quality can be determined. Internal

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performance appraisals can also capture this employee perspective. These performance appraisals can be conducted in different directions (cf. Scholz, 2014, pp. 493–519; Wicher, 2015, pp. 93–111): • Upside assessment Employees rate their manager in anonymous form. • Peer review Employees who are hierarchically equal evaluate each other in anonymous form. • 360-degree feedback

high low

Brand understanding

Employees are evaluated by employees in anonymous form at the same, subordinate and higher levels. This evaluation can also include customer assessments. In order to record the effects of the development of internal branding, the defined goals from the planning phase must be compared as target values with the values already achieved at regular intervals. In order to guarantee the effect of the measures taken, the control of the target achievement is carried out during the process and not only at the end of the reporting period. This makes it possible to identify deviations in good time and to modify strategies and measures or take countermeasures at an early stage. The brand identification portfolio shown in Fig. 5.102 can help to monitor success (cf. Kernstock, 2012, p. 28). In this portfolio, employees can be classified – based on an employee and/or customer survey  – with regard to their own brand understanding and perceived commitment to the brand. It is interesting if such an evaluation is carried out on a divisional or departmental basis. The results of the brand identification portfolio provide the basis for further steps. If necessary, impulses for the further development of leadership behavior can be conveyed. In addition, the optimization of internal communication as well as of the supporting systems can take place.

Spectator

Champions

„They know what they have to do, but the commitment to act is missing!“

„They know what they have to do and they feel commited to act!“

Low Performer

Unpredictable

„They have neither understood the brand, nor do they feel commited to act!“

"They feel committed to the targets, but lack an understanding of the brand!"

low

high Brand commitment

Fig. 5.102  Brand identification portfolio

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The approach developed by the Gallup Institute combines the internal and external perspective. Thus, both the perception of the employees and the perception of the customers are integrated into the evaluation. A distinction is made here between (cf. Fleming et al., 2005; Fleming & Asplund, 2007): • Employee engagement (in the sense of employee loyalty) • Customer engagement (in the sense of customer loyalty) Both dimensions are recorded using a standardised questionnaire. If these questionnaires – internal and external  – are used for different strategic business units, sales divisions or entire companies, internal benchmarking can be carried out (cf. Sect. 2.2.3.3). The constellations that can arise with regard to employee engagement in connection with customer engagement are shown by the engagement portfolio (cf. Fig. 5.103; cf. Fleming et al., 2005, p. 7). The goal is to achieve high scores on both dimensions.

high low

Employee engageemnt

• Field I Companies or departments located in field I are far from exploiting their potential – neither with customers nor with employees. Here – as in fields II and III – there is an “underperformance”. • Field II In this field, the employees are highly motivated, but do not care enough about the customers. There is a lack of skills or motivation here – or both. The employees may have fun, but the customers less so. • Field III Here, the employees perform well, but are not sufficiently supported by the company. The employees wear themselves out in customer contact. This shows a lack of systemic support.

II. Enthusiastic employees/ frustrated customers

IV. Enthusiastic customers/ enthusiastic employees

I. Frustrated employees/ frustrated customers

III. Enthusiastic customers/ unmotivated employees

low

high Customer engagement

Fig. 5.103  Engagement portfolio for the relationship between employee and customer engagement

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• Field IV Studies by Gallup show that optimum performance (measured in terms of the company’s financial results) is only achieved in this field – with a balance between customer and employee engagement on a high level (cf. Fleming et al., 2005). Based on these concepts, it becomes clear why the process of building brand-oriented behavior must be systematically monitored. The insights gained in the process reveal relevant fields of action. It can become clear that the investments required for the expansion of internal branding are already overcompensated in the short term by the positive effects of greater employee or customer engagement. cc

Memory Box  There is a positive relationship between employee satisfaction and loyalty to the company as well as between employee satisfaction and work commitment. There is also a positive relationship between employee satisfaction and customer orientation.

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What can be achieved through convincing internal branding?

–– Satisfied customers through satisfied employees.

Food for Thought  Marketing management must take all instruments of the marketing diamond equally in consideration in order to lead a company safely in competition. Focusing on only one or selected instruments no longer does justice to the challenges of the market and the environment.

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Things to Keep

• There are good reasons to permanently add a 5th “P” for personnel policy to the marketing mix – and not only in the service sector. • Employee loyalty to the company has been at a very low level in Germany for many years. • A Unique Passion Proposition for differentiation in competition is continuously gaining importance. • The marketing excellence turbine provides an orientation framework for the design of the relevant performance fields. • Internal branding aims to align employee behavior with brand values while ensuring a sales and customer focus. • The basis of brand-oriented behavior is an appropriate design of leadership, human resources management, internal communication and supporting systems. • The brand identity approach is a necessary prerequisite for the development of internal branding. • Employee- and brand-oriented targets are to be integrated into a balanced scorecard and continuously checked for their achievement.

References

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–– Loyal customers through loyal employees.  Questions to Check Your Level of Knowledge

1. What are the arguments for integrating personnel policy as the 5th “P” in the marketing mix? What aspects speak against it? 2. How high is the emotional attachment of employees to companies in Germany? 3. What effects does a low emotional attachment have on the willingness of employees to perform? What criteria can be used to determine this? 4. What is a Unique Passion Proposition? What is the difference between USP and UAP? 5. In which cases is a UPP of particular importance? 6. What is behind the marketing excellence turbine? What is its relevance? 7. What impact does globalisation have on the importance of human resources policy? 8. What is internal branding? What goals are associated with it? 9. What is meant by “brand-oriented behavior”? What is its significance today and why? 10. What tools can be used to create brand-oriented behavior? 11. How should “leadership” be designed to build brand-oriented behavior? 12. Which measures are to be used in human resources management to promote the development of brand-oriented behavior? 13. What types of internal communication are to be distinguished? Why is it useful to distinguish between different types? 14. Which instruments can be used overall for internal communication? How can these be classified? 15. How can a “strategic flow of information” be ensured within the company? 16. Which information fields should cover the “strategic flow of information”? 17. How can “dialogical communication” be achieved in the company? What goals are associated with it? 18. What is storytelling? What is the advantage of this approach? 19. Which systems can promote the development of brand-oriented behavior? What is their importance? 20. What is a dashboard? What is its importance in the context of building brand-oriented behavior? 21. In what way should internal branding be reflected in a balanced scorecard? Which requirements have to be considered? 22. What correlations has the Gallup Institute established with regard to customer and employee engagement? What consequences can be derived? 23. Which dimensions does the engagement portfolio cover? Which derivations can be made?

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5  Marketing Tools

Statista. (2021e). Zuschauermarktanteile der TV-Sender im April 2021. https://de-statista-com. ezproxy.hwr-berlin.de/statistik/daten/studie/75044/umfrage/zuschauermarktanteile-der-tvsender-monatszahlen/. Accessed on 10.05.2021. Statista. (2021f). Marktanteile der einzelnen Mediengattungen an den Bruttowerbeerlösen in Deutschland von Januar bis März 2021. https://de-statista-com.ezproxy.hwr-berlin.de/statistik/daten/studie/225279/umfrage/markanteile-der-mediengattungen-im-bruttowerbemarkt/. Accessed on 11.05.2021. Statista. (2021g). AWA: Reichweite ausgewählter Tageszeitungen in Deutschland im Jahr 2020. https://de.statista.com/statistik/daten/studie/161080/umfrage/reichweite-von-ueberregionalenabo-tageszeitungen-in-deutschland/. Accessed on 14.05.2021. Statista. (2021h). Fernsehen in Deutschland. https://de-statista-com.ezproxy.hwr-berlin.de/statistik/ studie/id/6383/dokument/fernsehen-in-deutschland-statista-dossier/. Accessed on 14.05.2021. Statista. (2021i). Schätzung des durchschnittlichen Preises kostenpflichtiger Apps für das iPhone und iPad weltweit in den Jahren 2009 bis 2023 (in US-Dollar). https://de-statista-com.ezproxy. hwr-berlin.de/statistik/daten/studie/170003/umfrage/preisentwicklung-von-apps-in-den-fuehrenden-app-stores-weltweit/. Accessed on 17.05.2021. Statista. (2021k). Anteil der Wirtschaftsbereiche an der Gesamtbeschäftigung in der Bundesrepublik Deutschland von 1950 bis 2020. https://de-statista-com.ezproxy.hwr-berlin.de/statistik/daten/ studie/275637/umfrage/anteil-der-wirtschaftsbereiche-an-der-gesamtbeschaeftigung-indeutschland/. Accessed on 18.05.2021. Stehr, C., & Struve, F. (Hrsg.). (2017). CSR und Marketing: Nachhaltigkeit und Verantwortung richtig kommunizieren. Springer Gabler. StepStone. (2017). Organigramm deutscher Unternehmen. In welchen Strukturen Fachkräfte künftig arbeiten wollen. https://www.stepstone.de/Ueber-StepStone/press/jeder-vierte-mitarbeiterkennt-unternehmensziele-nicht/. Accessed on 21.05.2021. Sutton, R. I. (2009). Der Arschloch-Faktor. Vom geschickten Umgang mit Aufschneidern, Intriganten und Despoten im Unternehmen. Heyne. Sutton, R. I. (2013). Lösungen für das Arschloch-Problem. Heyne. TCL. (2021). Verständlichkeit ist gut – Performance ist besser. https://tcl.digital/text-performance/. Accessed on 10.05.2021. Thoma, H. (2009). Das Helmut-Thoma-Alphabet. Frankfurter Allgemeine Sonntagszeitung, 03.05.2009, S. 54. Thompson, A.  B. (2017). Do good: Embracing brand citizenship to fuel both purpose and profit. Amacom. Tomczak, T., Esch, F.-R., Kernstock, J., & Herrmann, A. (Eds.). (2012). Behavioral Branding. Wie Mitarbeiterverhalten die Marke stärkt. Springer Gabler. Tusche, C. (2020). Virales Marketing: Virales Marketing verstehen  – ansteckende Kampagnen planen und umsetzen. Webmasterpress. UGW. (2021). POS-Marketing-Report 2021. Eine Konsumentenbefragung zu Shopper Insights am POS von medialog, POSpulse und UGW. UGW. Unilever. (2021). Unsere Marken. https://www.unilever.de/marken/?category=408114. Accessed on 10.05.2021. Vahs, D., & Brem, A. (2015). Innovationsmanagement. Von der Produktidee zur erfolgreichen Vermarktung (5. Aufl.). Schäffer-Poeschel. Voß, P. H. (Ed.). (2019). Logistik – die unterschätzte Zukunftsindustrie: Strategien und Lösungen entlang der Supply Chain 4.0. Springer Gabler. VuMA. (2021). Konsumentenverhalten transparent gemacht. https://www.vuma.de/. Accessed on 12.05.2021.

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von Walter, B., & Kremmel, D. (2016). Employer Brand Management. Arbeitgebermarken aufbauen und steuern. Springer Gabler. We are social. (2021). Digital 2021. https://wearesocial.com/de/blog/2021/04/60-prozent-der-­ weltbevolkerung-sind-inzwischen-online. Accessed on 17.05.2021. Wentzel, D., Tomczak, T., & Herrmann, A. (2012). Storytelling im Behavioral Branding. In T.  Tomczak, F.-R.  Esch, J.  Kernstock, & A.  Herrmann (Hrsg.), Behavioral Branding. Wie Mitarbeiterverhalten die Marke stärkt (S. 425–442). Springer Gabler. Wicher, U. (2015). Managementkompetenzen. Kiehl. Wiesner, K. A. (2016). Faires Management und Marketing. De Gruyter. Wirtz, B.  W. (2021). Multi-Channel-Marketing. Grundlagen  – Instrumente  – Prozesse (3. Aufl.). Springer Gabler. WTO. (2021). Anti-dumping. https://www.wto.org/english/tratop_e/adp_e/adp_e.htm. Accessed on 04.05.2021.

6

Development of a Closed Marketing Concept

For the possible to emerge, the impossible must be attempted again and again. Hermann Hesse You can’t manage change. You can only stay one step ahead of it. Peter F. Drucker Learning Objectives

Ability, • to understand the structure of a strategic as well as an operational marketing plan • to create a marketing plan independently • to allocate specific marketing activities to the individual phases of the product life cycle

6.1 Preparation of a Strategic and an Operational Marketing Plan In order to develop a cohesive marketing concept, the decisions made at the different levels must be brought together in a plan. The characteristics of a typical strategic marketing plan are shown in Fig. 6.1 (see also Meffert et al., 2019, pp. 918–920). This is where the company’s purpose, vision and mission are defined (cf. Chap. 3). In addition, the results obtained through the SWOT analysis, benchmarking, portfolio analysis, value chain analysis, etc. are documented (cf. Sect. 2.2.3). Based on these findings, the first step is to determine the opportunities and risks that have emerged, particularly for the planning period. © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 R. T. Kreutzer, Practice-Oriented Marketing, https://doi.org/10.1007/978-3-658-39717-3_6

473

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6  Development of a Closed Marketing Concept Strategic marketing plan

Purpose, vision and mission of the company External: opportunities and risks  Key competitors (currently and in the future)  Market development (including key influencing factors)  Technological and legal changes Internal: strengths and weaknesses  Performance of the sales staff  Quality level of the range of products and services  Qualification of the marketing team as a whole Assessment of the success of the company and of strategic business units in the past  Company as a whole  Strategic business units 1, . . . , n Strategic corporate targets  Turnover, profit  Market share (absolute, relative)  EBIT, EBITDA, ROI, ROS, ROCE

Strategic marketing targets Marketing strategies  Market field strategy  Market stimulation strategy  Market segmentation strategy  Market area strategy Strategic offer portfolio  Product/service portfolio  Technology portfolio  Performance component Portfolio Marketing organization  Organizational structure of marketing  Process organization of marketing  Marketing planning processes  Marketing implementation processes  Marketing controlling processes

Fig. 6.1  Structure of a strategic marketing plan

• What changes in competition will occur in the next few years? • What additional factors have an impact on market development? This can be the economic situation in the target markets. This has an impact, for example, on the propensity to buy and invest, but also on the development of unemployment. • Are there any technological and/or legal changes on the horizon that need to be addressed during the planning period? • What are the challenges associated with increased digitization? This external perspective is followed by an analysis of strengths and weaknesses. The strengths and weaknesses of the company are to be determined in comparison with relevant competitors. This can be used to identify the strengths of the company’s sales team. The range of services is also to be evaluated in comparison with competitors. The level of qualification of the marketing team in general is also part of the information to be recorded here (cf. Chap. 2). The detailed evaluation of the company and its strategic business units follows. These results form the basis for strategic decisions at the corporate level (cf. Sect. 3.3). Based on the strategic definitions of the entire company and founded on the findings of various analysis instruments, the definitions are made in the marketing area (cf. Fig.  6.1). This includes the development of the strategic marketing targets and the marketing strategies. These determinations are concretized in the strategic offer portfolio (cf. Chaps. 3 and 4).

6.1 Preparation of a Strategic and an Operational Marketing Plan

475

In addition, the strategic marketing plan must determine how marketing is to be organized. This includes, on the one hand, the organizational structure of marketing. This determines the form in which marketing is to be anchored in the company organization. This can be done as a board department, as a divisional function or as a subordinate service function (cf. Chap. 8). The hierarchical integration of marketing, the number of employees working in this area, and the size of the budget available to marketing can be interpreted as indicators of the relevance of marketing as a management concept in the company. On the other hand, the process organization of marketing must be designed. These relate in particular to the areas of planning, implementation and controlling of marketing (cf. Chap. 7). Here the following questions must be answered: • How is internal company networking ensured when different functional areas take on marketing tasks? • Who is responsible for controlling the marketing activities? • How should an internal marketing performance measurement system be designed? In each case, the questions about organization must be answered both substantively (i.e., “What should be done?”) and procedurally (i.e., “How should something be done?”). cc

Food for Thought  Try to gain insight into a strategic marketing plan. What topics are covered there? What additional insights can you gain from a real strategic marketing plan?

The operational marketing plan is derived from the strategic marketing plan. It represents a concretization of the strategic marketing plan, which is usually oriented towards three to 5  years. The operational marketing plan serves as the basis for the steps to be implemented within a fiscal year (see Fig.  6.2). This plan is therefore usually oriented towards 12 months. In the operational marketing plan, the short-term developments to be expected in the company’s environment are initially recorded. In addition, the relevant market is specified here. In doing so, it is documented – based on the company’s strategic definitions – for which offer the plan is valid. It is also determined which target groups are to be addressed in which regions and/or countries. The results of the analyses also flow into the design of the operational marketing plan. These include, in particular, the analyses in the run-up to a product launch (cf. Sect. 2.2.3) as well as the results of ongoing analyses, such as panel studies, customer surveys and analyses to substantiate brand management (cf. Sect. 2.2.4). In addition to fixing these framework conditions, the marketing targets must be documented (cf. Chap. 3). A target pyramid or a balanced scorecard should be designed and existing target conflicts should be addressed. The marketing strategies derived from this are to be concretized as guidelines for operative marketing and broken down into the design of

476

6  Development of a Closed Marketing Concept Operational marketing plan

Forecasts on the short-term development of the relevant environments of the company  Macro-environment (political, legal, social, cultural, economic, technological environment)  Micro-environment (customers, suppliers, investors, competitors)

Definition of the relevant market  Product/service  Core and peripheral target groups  Regional target area (at national or international level)

Implementation and controlling  Content-related responsibilities for implementation and marketing controlling  Process-related responsibilities for implementation and marketing controlling

Marketing targets  Definition of the targets to be achieved during the action period  Development of a target pyramid or a balanced scorecard for all involved areas  Documentation of the respective target relationships Marketing strategies  Determination of the strategic options  Concretization of the strategic design for the action period Marketing instruments  Shaping the marketing diamond (5 Ps)  Integration of the various activities across online and offline boundaries; implementation of a noline approach Marketing budget  Amount of the budget  Allocation of the budget to action areas  Priorities of the action areas

Fig. 6.2  Structure of an operational marketing plan

the marketing instruments (cf. Chaps. 4 and 5). In this context, attention must be paid to the integration of marketing tasks that may be handled by different functional areas. The marketing budget represents the bracket around all these activities. By allocating the marketing budget, there is a highly visible prioritization. Here it becomes clear which focal points in marketing and thus also in the company will be undertaken in the current fiscal year.

cc Food for Thought  Try to gain insight into an operational marketing plan. What topics are covered there? What additional insights can you gain from a real operational marketing plan? 

6.2 Assignment of Activities to the Product Life Cycle On the basis of such a marketing plan, the actions can start, which are oriented to the phases of the product life cycle. An ideal-typical assignment is provided in Fig.  6.3. Depending on the marketing targets and strategies (e.g. with regard to positioning), such an assignment can also turn out differently. The activities assigned in Fig. 6.3 serve here as food for thought. cc

Food for Thought  Try to determine which phase of the product life cycle they are currently in for some of your favorite products. What actions by the manufacturer can you identify? 

6.2 Assignment of Activities to the Product Life Cycle

Increase distribution in wholesale and retail Motivate retailers through dealer promotions Increase product awareness through online and offline advertising Promote initial purchases (e.g. through coupons, introductory prices, secondary placements, tastings)

477 Improve product

Promote repeat purchases Further increase product awareness

Maintain distribution network

Increase customer base

Improve packaging

Increase purchase frequency Increase distribution density

Repositioning of the product range Develop new uses Strengthen sales commitment

Develop product Win regular customers Expand product line

Reward customer loyalty Avoid customer churn

Win new user groups

Secure trade commitment (e.g. through sales Open up new sales promotion) channels Conquer new markets

Thinning out the offer Slow down the shrinkage of the distribution network Increase price attractiveness Increase advertising

Place substitute product Align customers with new offering Remove product from the market

Fig. 6.3  Ideal-typical allocation of operative marketing activities – oriented to different phases of the product life cycle

cc

Things to Keep

• In the marketing plan, all short- and long-term action-relevant information merge in a condensed form. • The marketing plan documents the tasks, the relevant environment and the marketing determinations made. • Classically, a distinction is made between a strategic and an operational marketing plan. • Ideally, different activities can be assigned to the individual phases of the product life cycle on an instrumental level.

Questions to Check Your Level of Knowledge

1. What fields must a strategic marketing plan cover? 2. What specifications are included in an operational marketing plan? 3. What frameworks need to be fixed in these marketing plans? 4. Which definitions are made at the operational level of targets, strategies and instruments? 5. What is the function of the marketing budget? 6. Work out a strategic marketing plan for an automobile manufacturer of your choice with other people. Which framework conditions have to be taken into account? What are the main targets of such a company? What strategies would you recommend to the company you have chosen? How could the marketing diamond be designed?

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6  Development of a Closed Marketing Concept

7. Together with other people, develop an operational marketing plan for a (fictitious) bookshop in your home town. What are the general conditions? What targets could this bookshop realistically pursue? What strategies could be used? How could the marketing diamond be shaped? 8. Which operational marketing activities can be assigned to different phases of the product life cycle and why? 9. How might the measures assigned here differ if a company has different marketing goals? 10. How might the measures differ between a national one-product company and an international group with dozens of products?

Reference Meffert, H., Burmann, C., Kirchgeorg, M., & Eisenbeiß, M. (2019). Marketing, Grundlagen marktorientierter Unternehmensführung. Konzepte  – Instrumente  – Praxisbeispiele (13. Aufl.). Springer Gabler.

7

Marketing Controlling

You can’t manage what you can’t measure. Managerial wisdom Learning Objectives

Ability, • • • •

to recognise the importance of marketing controlling to distinguish between strategic and operational marketing controlling to recognise the relevance of the marketing audit to master the instruments of strategic and operational marketing controlling with confidence • to use instrumental audit methods

7.1 Labeling and Targets of Marketing Controlling As introduced in Sect. 1.1.3, each department – not only marketing – should define specific objectives derived from the overall business targets. In order to achieve marketing goals, various strategies are used in marketing, which in turn influence the use of marketing tools. cc

Memory Box  Only by setting targets and fixing them in writing, if possible, a manager can evaluate the success of marketing.

Controlling – or more precisely, marketing controlling – is responsible for monitoring and evaluating success. This represents a subarea of the corporate controlling. For this reason, marketing controlling is often closely networked with the controlling of the entire company. © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 R. T. Kreutzer, Practice-Oriented Marketing, https://doi.org/10.1007/978-3-658-39717-3_7

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7  Marketing Controlling

The functions of marketing controlling are shown in Fig. 7.1. The core tasks of marketing controlling are to promote the effectiveness and efficiency of marketing. In detail, the functions of marketing controlling can be specified as follows (cf. Reinecke, 2021): • Information function • The core of the information function is to provide the various service providers in marketing with the relevant information. This ranges from contribution margin ­calculations and the estimation of development costs for product and service innovations to an in-depth analysis of technological developments in the field of artificial intelligence. • Planning function • In this area, it is the task of controlling to support the design of strategic and operational marketing planning. Special attention is paid to the analysis of planned marketing strategies and various operational measures. These must be evaluated with regard to their effectiveness and efficiency. These evaluations can have a direct impact on marketing budgeting. • Measures for evaluating innovations using scoring models are also part of the support for the planning processes. Further profitability analyses and feasibility studies are also part of the tools of marketing controlling (cf. Sect. 5.1.2). • Coordination function • Marketing controlling also provides important support by coordinating the targets, strategies and operational measures of marketing with each other and with regard to the Marketing controlling Ensuring effectiveness and efficiency in marketing Information function Focused information supply of marketing

Planning function Supporting the strategic and operational marketing planning

Coordinatioon function Management of interfaces beyond departments/areas

Control function Controlling of all marketing activities

Fig. 7.1  Functions of marketing controlling

7.1 Labeling and Targets of Marketing Controlling

481

other corporate divisions. Interface management beyond marketing is of particular importance here in order to promote the achievement of corporate goals. • Control function • In the strategic area, for example, controlling aims to critically examine the informational basis of planning. It can also be used to check how successful the implementation of planning is. In the operational environment, the main task is to analyze the results achieved in the various target groups and target markets. It is also necessary to check how successful the use of various marketing instruments has been. Here, marketing controlling should determine whether the defined goals have been achieved by means of retrospective target-performance comparisons. The spectrum ranges from the success of an online banner campaign to out-of-home campaigns and comprehensive customer loyalty systems. To monitor and evaluate marketing activities, controls can start with the input, the output and the processes used. Starting points for optimization can be found everywhere. Here it becomes clear that marketing controlling can and should make an important contribution to the creation and exploitation of success potentials in addition to “pure control” (cf. Becker, 2019, pp.  892–912; Meffert et  al., 2019, pp.  925–962; Ehrmann, 2016; Halfmann, 2017; Zerres, 2021; on specific key figures Krause & Arora, 2010). cc

Memory Box  The process of marketing management in Fig. 1.3 already shows how comprehensive the controlling approach should be.

The general objective of marketing controlling is both a selective and continuous analysis of marketing activities and the results triggered by them. In the course of this analysis, various comparative and target figures can be used to evaluate the results achieved. The overriding question in marketing controlling is always the extent to which marketing and its activities contribute to ensuring the long-­term success of corporate management. Four different concepts can be used to fill the functions described – information, planning, coordination and control. These are shown in Fig. 7.2. There it also becomes clear that the different approaches are associated with different complexity and also different value for the company (cf. Kreutzer, 2022). • Descriptive analyses (description, reporting) • Descriptive analysis shows what happened in the past and why. This includes classic reports on the sales and earnings development of the entire company or individual business units. The presentation of the development of customer value as well as response analyses for online and offline activities also belong to this category. In the procurement sector, reports are provided on supplier relationships. In the production sector, data is provided on machine utilization and vulnerability, output quantities, overall equipment efficiency, etc. In the logistics sector, information can be provided on what delivery reliability was achieved, how capacity utilization turned out, etc.

7  Marketing Controlling

Description (description of the “actual“)

Inspection (analysis of the “why“)

Prediction (prediction of the “will“)

Prescription (recommendation of the “what“)

low

Value for the company

high

482

low

Complexity of the task

high

Fig. 7.2  Concepts of a comprehensive controlling approach

• Diagnostic analyses (inspection) • Diagnostic analyses look for the causes, effects and possible interactions of different circumstances. Here, correlations and causal relationships are sought in order to understand an issue in depth. As with descriptive analyses, the focus here is on the past. One wants to understand why something happened. This may be a large number of cancellations by customers received in recent weeks. Or it may be to determine what led to a significant increase in visitors to the e-commerce store and a significant increase in the conversion rate. At the same time, it can be determined what has caused supply chains to break and what are the underlying causes of serious losses in product quality. The subject of the analysis can also be an increased fluctuation in the personnel area. • Predictive analyses (prediction) • Predictive analytics tries to make forecasts about future events. These predictions can relate to the response behavior of customers to various marketing campaigns, to the prediction of payment defaults and to the failure of machines (keyword “predictive maintenance”). Corresponding predictions are also important when determining the success of business model innovations as the basis for a business plan. • Prescriptive analyses (prescriptions, recommendations) • Prescriptive analyses develop recommendations on how a company should act. Such recommendations can relate to investments in financial assets, to milestones in the establishment of new business models or – quite specifically – to the derivation of customer acquisition and retention activities. The selection of suppliers and the design of production and logistics processes can also be based on prescriptive analyses.

7.2 Strategic Marketing Controlling

cc

483

Memory Box  The breadth of the tasks outlined here underscores the fact that controlling should not be translated simply as “control”. Marketing controlling is also much more than “accounting in marketing”.

A powerful controlling is an important partner for managers and employees to make better decisions. It is in the nature of things that managers and employees are not always enthusiastic about the results of controlling measures! The tasks of marketing controlling can be located on the strategic as well as on the operational level. Here, marketing controlling has to critically analyze the entirety of marketing. Marketing controlling can and should also support the development of creative solutions. Marketing controlling that is limited to monitoring results at the end of a fiscal year does not do justice to its claim.

7.2 Strategic Marketing Controlling The focus of strategic marketing controlling is on the fundamental issues of marketing. Here it is analyzed whether the organizational structure and process organization of marketing is still suitable to optimally support the achievement of marketing goals and the implementation of marketing strategies. In addition, strategic marketing controlling can make an important contribution to identifying and exploiting future success potential for the company. Here, new business models in particular should be considered (cf. Kreutzer, 2022). Operational marketing controlling focuses on monitoring and analyzing results in order to gain optimization impulses for ongoing (operational) marketing activities. A special marketing controlling concept is the marketing audit. A marketing audit involves a critical reflection on individual or all marketing activities of a company. Marketing audit can be defined as a comprehensive, systematic and regular examination of the marketing environment, targets, strategies and activities of a company or a strategic business unit that is not bound by instructions (cf. Kohlert, 2013). The purpose of a marketing audit is to identify as early as possible risks that may be caused by the way marketing management is structured. The marketing audit can be more strategically or more operationally oriented. In the case of a strategic orientation, a systematic comparison is made – e.g. at one- or two-year intervals – between the changes in the environment and the marketing conditions within the own company. These include not only the content of marketing activities, but also the processes and structures of marketing. Based on the findings of an audit, the systems themselves (e.g. the marketing organization), the processes used and/or the goals and strategies employed may need to be revised. The instruments of the SWOT analysis and the 5-forces analysis defined in Sect. 2.2.3.1 can be used to record the external conditions. This scanning of the corporate environment is intended to identify emerging changes with relevance for the design of marketing in the sense of an early warning system or better early detection system. This procedure

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7  Marketing Controlling

is based on the assumption that significant changes in the environment and market (here with regard to customers and competitors) often do not occur abruptly, but are announced by weak signals. Weak signals in this context can be the declining acceptance of drug residues in food, an increasing demand for fair trade and organic products, or the trend towards smaller family sizes. A strategic marketing audit serves to uncover these signals and derives both opportunities and risks for the company. Based on this, marketing concepts are to be developed that ensure the profitable growth of the company even when the changes that may only be faintly emerging occur. This future-oriented controlling is intended to ensure that marketing measures are adapted to environmental changes in a timely and comprehensive manner. cc

Memory Box  A strategic audit is intended to check whether a company is active with the right products and services in the relevant markets at the right time and with the appropriate strategies.

7.3 Operational Marketing Controlling One of the main tasks of operational marketing controlling are plan/actual comparisons that focus on “day-to-day business”. Here, the achieved marketing results (actual) are compared with the results, which were defined within the planning processes. A central basis for this are the target concepts specified in Chap. 3. These include, above all, the brand value chain and the balanced scorecard. In these areas, the focus is on a classic review of results with the task of determining the degree of target achievement and, if necessary, also initiating a root cause analysis for this. Only such a root cause analysis enables an organization to learn from past successes and failures. Only in this way can an optimization of the approach be ensured in the future. In any case, these controlling measures require sound planning. Only when precise targets have been defined (cf. Sect. 3.2 on formulating targets) can controls be carried out to determine the effects of the strategies and instruments used. Operationally formulated goals also represent the relevant control variables. These can be profit or sales targets, targets for ROI or ROS, or target EBIT values. Another proven instrument that is often used here is the contribution margin calculation presented in Sect. 5.2.3.1. In the course of this operational controlling, the actual values achieved for each target figure are recorded period by period and compared with the target values. If deviations are too great – even during the year – it may be necessary to adjust the marketing activities themselves. This can be an additional advertising campaign, a further development of the service offers, the closure of branches or the reduction of prices in order to achieve the targets within the year. However, it is much more difficult for a marketing manager to push through “downward” adjustments to targets vis-à-vis his or her superior, because this can jeopardize the achievement of the company’s overall goals. If, however, it is clear that serious changes

7.3 Operational Marketing Controlling

485

in the market mean that target achievement can no longer be guaranteed, this should be reported promptly and alternative plans drawn up. The need for such adjustments may arise as a result of an unforeseen economic crisis, a pandemic or an environmental disaster such as a tsunami. cc

Food for Thought  Problems and tasks do not disappear by ignoring them! 

The conclusions drawn from controlling should necessarily flow into subsequent planning processes in order to ensure a closed-loop approach shown in Fig. 7.3. Then – based on precise marketing objectives – the corresponding measures are to be developed and the results achieved are to be recorded. Based on their analysis, m ­ easures for optimization are to be derived, which in turn are to flow into the targets of marketing. The result is a learning organization that draws conclusions from the successes and failures of the past and acts accordingly in the future. cc

Memory Box  A closed-loop approach is understood to be a closed cycle that begins with the targets to be achieved. In order to achieve these targets, corresponding measures are derived. The implementation of these measures leads to certain results. These results are to be analyzed in order to identify optimization opportunities. The insights gained can lead to the adjustment of targets and the development of appropriately optimized measures. This closed loop provides an indispensable contribution to a learning organization.

If an operational marketing audit is used, it is checked once a quarter or once a year, whether the company is “on track” with its marketing concept. A questionnaire is then used to analyze whether the marketing measures are optimally designed in terms of their efficiency and effectiveness. In addition, it is also necessary to check the results of individual marketing instruments on the basis of the defined success variables. For this purpose, concepts can be used that can be classified as instrumental audits. The core of such an

Targets

Actions

Optimization Results Insights from analysis

Fig. 7.3  Closed loop of marketing controlling

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7  Marketing Controlling

audit is to check the individual instruments of the marketing diamond themselves for their target-­oriented use. Figure 7.4 shows selected question fields of such an audit. In the context of the in-depth analysis of product and programme policy, operational marketing controlling is concerned with the question of which instruments can be used to check the attractiveness of the company’s range of offers. A product-related ABC analysis is a proven method. In this analysis, the products of a company are represented as a concentration curve (also called Lorenz curve) depending on their share of sales or contribution margin (see Fig. 7.5). To create such an ABC analysis, the products are entered into this graph one after the other. Here, one starts with the product that accounts for the largest share of sales. Then follows the product with the second largest share of sales, and so on. Such a relatively simple analysis makes it clear to what extent a company is dependent on individual products and how vulnerable it is accordingly. If – as in this example – just under 80% of sales are generated with only 20% of the products, special attention must be paid to these A-products. After all, problems with these A-products would lead to serious drops in sales. These products with a particularly high share of sales are also referred to as bread & butter products.

 To what extent do the products/services offered (still) meet customer expectations?  Is the product/service range balanced in terms of contribution margin, share of sales, degree of innovation, etc.? Product and, programme policy  Does the product/service portfolio include a sufficient number of new offerings?  Does the product/service programme differentiate sufficiently in the competitive environment?

Prices and conditions policy

   

Is the conditions structure sufficiently transparent for customers? Is price differentiation used to attract different target groups to the offer? Do the terms and conditions of supply differentiate the company from the competition? What effects do changes in prices and conditions have on sales and profits?

Distributions policy

    

Are the sales generated distributed evenly across different distribution channels? Which potentials in individual channels have not yet been exploited? Are synergies between the individual channels systematically identified and exploited? Does an omni-channel distribution concept offer specific advantages for customers? Do the incentive systems used ensure a high level of sales support?

   

Is off- and online communication comprehensively networked ("noline")? Are comments on social networks quickly identified and responded to? Are the data and information bases for the customer approach regularly reviewed? Is every customer approach designed against the background of the achievable customer value?

   

Is emphasis placed on recruiting truly "customer-focused" employees? Is brand, customer and sales orientation taught in all training courses? Are employees on the "customer front" systematically motivated? Does comprehensive systems support take place for employees on the "customer front"?

Communication policy

Personnel policy

Fig. 7.4  Selected questions of an instrument audit of the marketing diamond

7.3 Operational Marketing Controlling

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Turnover 100 %

80 %

60 %

40 %

20 %

Aproducts

Bproducts

Cproducts

Products 20 %

40 %

60 %

80 %

100 %

Fig. 7.5  ABC analysis of the product range

At the same time, it must be asked whether the B- and C-products, which do not yet account for a large share of sales today, include products with future potential. Which of these B- and C-products have the potential to become bread & butter products one day? cc

Memory Box  An ABC analysis must not be designed statically to determine only the status quo. An ABC analysis must be designed dynamically. Only then can it succeed in developing products from the B- and C-segments into future A-products. 

An ABC analysis can also provide important information for other questions. The following fields of application are relevant: • Classification of customers • Which are the A-customers on whom the company is particularly dependent today? Which B- and C-customers have the potential to become A-customers tomorrow? • Classification of distribution channels • Which sales channels generate the largest share of sales/profit today? Are these own or third-party sales channels? How can possible dependencies on individual sales channels be reduced? How can particularly important sales channels be secured in the long term? • Sales markets

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• On which sales markets is the company particularly dependent today? How politically or economically endangered are these markets? Which B- and C-markets can be systematically developed in order to reduce dependence on the A-markets (e.g. China)? • Procurement sources • What is the importance of certain procurement sources? Are there sources that supply more than 50% or 60% of a category? How vulnerable are the A-procurement sources? Can alternative procurement channels be developed in a timely manner? How can strategic suppliers be tied to one’s own company in the long term? cc

Memory Box  The dependency on certain products, customers, distribution channels, sales markets and procurement sources becomes clear through the identification of concentration effects. The extent of the concentrations achieved can be a reason for countermeasures to reduce excessive dependencies.

In the ABC analyses, the phenomenon known as the Pareto principle becomes clear. Often a 20–80% relationship can be seen here. This is why one also speaks of the 20:80 rule. This relationship indicates a tendency that is repeatedly encountered in the analysis of concentration effects. However, it is not a matter of exactly reaching the values “20” or “80”. These values only show a frequently determined result. cc

Memory Box  Incidentally, the Pareto principle was named after its discoverer – Vilfredo Pareto. Pareto studied the distribution of land ownership in Italy at the beginning of the twentieth century. He found that about 20% of the population owned about 80% of the land. In 2021, the 20% richest Germans own 75.6% of the total net wealth. A similar distribution can be seen again and again in international analyses – relatively stable. 

A customer analysis may reveal that approximately 25% of the customers generated 85% of the contribution margin. It may also become apparent that 30% of customers caused 70% of the “problems”. Also, it may happen that 80% of the returns are for 25% of the products. In all cases, action is required! cc

Food for Thought  Check whether there are also Pareto effects in your private environment. Are there any Pareto music titles that you like to listen to again and again? Do you have Pareto clothes that you wear more often than average? Do you have Pareto friends with whom you spend more time than average? Do you have Pareto restaurants where you eat out more often than average? What other Pareto effects can you identify? 

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Memory Box  Concentration effects exist everywhere  – professionally and privately. It is important that we derive the right decisions from the concentrations we find. 

7.3 Operational Marketing Controlling

489

Product group A

2

Product group B

7

Product group C

38

Product group D

5

Product group E

9 40

30

20

10 1

Sales/profit contribution in %

2

3

4

5

Life expectancy in years

Fig. 7.6  Age structure analysis of a product range (in the bars is mentioned the “number of products”)

The age structure analysis rounds off the evaluation of the product and service range. Here, the sales or profit contribution of individual products is determined and what life expectancy still exists (cf. Fig. 7.6). Figure 7.6 shows that the largest share of sales depends on two product groups – specifically A and B. However, based on the results of marketing research, these two groups have only a short life expectancy; in this case less than three years. The reasons for the low life expectancy can be successfully introduced replacement products or successor technologies. For this reason, products from the company’s own product range that can take over sales or profits must be identified. If such products cannot be found, an innovation process must be started immediately in order to compensate for the foreseeable loss of sales and profits with new offers. Such analytical instruments can be used to continuously monitor the success and future potential of the programme. If any need for action becomes apparent, the innovation process outlined above can be started immediately. Marketing planning must then be adjusted accordingly. Operational marketing controlling can take on a specific form as sales controlling (cf. with a focus on assortment analysis). Here the following questions can be the focus: • • • • •

Sales/contribution margin per sales channel Revenue/contribution margin per sales employee/per sales region Number of customer contacts per sales employee Number of complaints per sales employee Number of new customers per sales employee

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7  Marketing Controlling

• Acquisition costs per new customer and per sales employee • Price discounts granted per sales employee • Ratio of internal sales staff to external sales staff Memory Box  Each subarea of marketing  – both at the strategic and operational level – must be regularly scrutinized with regard to the added value it provides for the company. This is the only way to ensure that marketing is not experienced as a “cash burner”. If the contributions generated become visible and thus also documentable, marketing can position itself as a central value driver of the company. 

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Things to Keep

• Marketing controlling is an indispensable part of marketing management. • Marketing controlling covers strategic and operational issues. • Marketing controlling has four functions: information function, planning function, coordination function and control function. • Consequently, control is only one component of marketing controlling – albeit a very important one. • A distinction must be made between descriptive analyses (description, reporting), diagnostic analyses (inspection), predictive analyses (prediction) and prescriptive analyses (prescription, recommendations). • A marketing audit can be used on the strategic as well as on the operational marketing level. • A company’s product range must be continuously evaluated in terms of its long-­ term attractiveness. • The Pareto principle, which clarifies concentrations, can be found in the entrepreneurial as well as in the private environment.

Questions to Check Your Level of Knowledge

1. How can marketing controlling be characterized? 2. How does marketing controlling fit into corporate controlling? 3. How does strategic controlling differ from operational controlling? 4. Which functions of marketing controlling are distinguished? 5. Which concepts of controlling are used for the different questions? 6. What is meant by the “closed-loop approach”? What is its significance? 7. What is meant by marketing audit? What types are distinguished here? 8. What is an instrumental audit? What insights can be gained through such an audit? 9. Which results can be determined by the ABC analysis? How are these to be interpreted?

References

491

10. What is the Pareto principle? What is its significance? 11. Where can the Pareto principle be observed? 12. In which fields – outside of product and programme policy – can ABC analysis also be used? 13. Apply an ABC analysis on a per-customer basis with the following sales-related data set: customer 1: € 25,000, customer 2: € 8000, customer 3: € 14,000, customer 4: € 5000, customer 5: € 70,000, customer 6: € 12,000, customer 7: € 43,000, customer 8: € 2500. What findings can be derived from this? What dangers are associated with this sales-related ABC analysis? 14. Your task is to perform a sales segment calculation by region. The following data set is to be used: Sales revenue is distributed as follows: region A: €  800,000, region B: € 1,200,000, region C: € 600,000. The direct material costs for the three regions amount to € 300,000 and are to be allocated in proportion to sales. The tough competition in region B has made an additional advertising campaign for €  100,000 necessary. A sales representative works in each region. Their costs amount to € 100,000 (A), € 95,000 (B) and € 84,000 (C). The total sales manager’s salary of € 160,000 is to be divided equally among all the regions. Which region achieves the highest profit? 15. What relevance does the age structure analysis have for product and programme policy decisions? How is this analysis structured? 16. Which questions can be dealt with in the course of sales controlling?

References Becker, J. (2019). Marketing-Konzeption. Grundlagen des ziel-strategischen und operativen Marketing-Managements (11. Aufl.). Vahlen. Ehrmann, H. (2016). Marketing-Controlling (5. Aufl.). Kiehl. Halfmann, M. (2017). Marketing-controlling. Springer Gabler. Kohlert, H. (2013). Marketing-Audit  – Überprüfung der Leistungsfähigkeit im Marketing technischer Unternehmen. In G. Hofbauer, A. Pattloch, & M. Stumpf (Hrsg.), Marketing in Forschung und Praxis (S. 999–1009). Uni-Edition. Krause, H.-U., & Arora, D. (2010). Controlling-Kennzahlen. Key Performance Indicators (2. Aufl.). De Gruyter. Kreutzer, R. T. (2022). Toolbox digital business. Springer Gabler. Meffert, H., Burmann, C., Kirchgeorg, M., & Eisenbeiß, M. (2019). Marketing, Grundlagen marktorientierter Unternehmensführung. Konzepte  – Instrumente  – Praxisbeispiele (13. Aufl.). Springer Gabler. Reinecke, S. (2021). Marketingcontrolling. Springer Gabler Verlag (Hrsg.), Gabler Wirtschafts lexikon. https://wirtschaftslexikon.gabler.de/definition/marketingcontrolling-­41129/version­264500. Accessed on 25.05.2021. Zerres, C. (Hrsg.). (2021). Handbuch Marketing-Controlling: Grundlagen – Methoden – Umsetzung (5. Aufl.). Springer Gabler.

8

Marketing Organization

Structure follows strategy. Alfred Chandler Structure leads to strategy. Managerial wisdom Learning Objectives

Ability, • • • • • •

to recognise that there can be no such thing as “the” optimum form of organization to distinguish between process organization and organizational structure to understand which processes are part of the process organization to distinguish between different concepts of organizational structure to apply different concept of organizational structure to distinguish different types of marketing organization

8.1 Basics of Business Organization Based on the above-mentioned quotations, it becomes clear that the organizational form of a company is directly related to the company’s targets and thus also to the company’s strategies. Therefore, there can be no “optimal form of organization”. The organization is about supporting the company in the best possible way to achieve the respective targets as well as the implementation of the strategies. Because of these interdependencies, the organizational form of a company is not static. If the targets and/or strategies of a company change to a greater extent, the organization of the company often has to be adapted. © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 R. T. Kreutzer, Practice-Oriented Marketing, https://doi.org/10.1007/978-3-658-39717-3_8

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This process of further development of an organization is called reorganization or restructuring (cf. Frese et al., 2019; Kieser & Ebers, 2019; Kieser & Walgenbach, 2010; Rahn & Mintert, 2019; Schreyögg & Geiger, 2015; on change management Kreutzer, 2018, 2022, pp. 499–530).

8.2 Business Process and Organizational Structure Every company needs an internal structure in order to manage the complex tasks derived from the company’s targets and thus also from its strategies as efficiently and effectively as possible. These tasks are best divided into several components, both in terms of processes and with regard to the organizational units to be entrusted with them. In this way, tasks can be solved more quickly and, if necessary, more effectively. For this support, a distinction must first be made between the process organization and the organizational structure. Process organization refers to processes that divide complex tasks into work steps. This is intended to achieve better manageability. These include the activities of marketing research, marketing controlling and marketing planning mentioned in Fig. 1.3. Here, it is necessary to determine how the planning and controlling process is to be designed in a company like Coca-Cola, which is active in over 200 countries, compared to a stationary retailer like Kaffee Manufaktur, Würzburg. These two examples show that the complexity to be managed varies greatly. An example of a more complex planning process for communication is shown in Fig. 5.56. Section 2.1.1 shows how a planning process can vary in general. In addition to the design of the process organization of a company, the organizational structure must be developed. The object of the organizational structure is the creation of various organizational units. Here, a distinction is made between divisions, departments or staff units. Such definitions can be based on the strategic business units presented in Sect. 2.1.2. Tasks, competencies and responsibilities are assigned to these organizational units. The tasks can relate to marketing, purchasing, sales, production, human resources or controlling. In order to achieve the goals, the necessary resources are assigned to the organizational units. In addition to employees and budget, these may also include office or production space and technologies. Within the framework of the organizational plan, it must be determined where in the organizational hierarchical structure the individual organizational units are to be placed. A visual representation of the company structure is called an organizational chart. In this organizational chart, the various hierarchy levels become visible (see Fig. 8.1). The proximity of an organizational unit to the company management in such an organizational chart is an indicator of the importance of this unit in the company as a whole.

8.2 Business Process and Organizational Structure

495

Top management Level 1 Europe

Asia

Staff unit legal affairs

America

Level 2 Western Europe

Eastern Europe

North America

South America

Level 3 Procurement

Production

Level 4

Controlling

Marketing

HR

Level n

Fig. 8.1  Organizational chart of a company

Within an organizational chart, one speaks of line and staff positions. Managers who are responsible for a line position are called line managers. They have the right to issue instructions to the subordinate organizational units. This is also called disciplinary management responsibility. It not only includes defining and controlling tasks for the subordinate units, but also includes hiring, promoting, and firing. Setting compensation for direct reports – usually in close coordination with human resources – is also part of disciplinary management responsibility. This disciplinary management responsibility is illustrated by the vertical downward lines in the organizational chart in Fig. 8.1. Parallel to line positions, staff positions are often defined in larger companies. The managers responsible for these (staff unit managers) have only an advisory function vis-­ à-­vis the organizational units to which they are assigned. They are often created to relieve line managers and to advise them in specific areas of responsibility. In Fig. 8.1 it can be seen that the staff unit legal affairs is disciplinarily subordinate to the corporatae ­management. This can be seen from the solid line. At the same time, it can be seen that the legal staff unit only has an advisory function vis-à-vis the “Europe”, “Asia” and “Americas” departments without any disciplinary authority. This can be seen from the dotted line. If staff positions are defined in a company in addition to line responsibilities, this is referred to as a staff-line organization. Such staff units typically cover areas of responsibility that lie outside the core competencies of the line manager and/or involve a high time commitment that the line manager cannot afford. The following staff units are often found in companies: • Staff unit “Legal affairs” • This is where legal advice is provided to other departments and divisions of the company, for example with regard to the implementation of the General Data Protection Regulation.

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• Staff unit “Strategic Planning” • This supports the entire organization in the planning process, for example by carrying out strategic analyses (such as SWOT analysis, benchmarking). • Staff unit “PR” • The Public Relations are often set up as a staff unit of the corporate management. In this case, the PR unit does not have a directive function vis-à-vis the other organizational units. In addition to these specialized staff positions (“specialists”), there are also more generalist staff positions. The latter is the case, for example, with assistants to the management/ the executive board or with team assistants (“generalists”). Both specialists and generalists have a qualified support function. There is no authority to issue instructions to other units. cc

Memory Box  Even without the authority of staff units to issue directives, line managers are well advised to “get on good terms” with such staff units. These staff units often have direct access to important decision-makers in the company. Qualified cooperation can therefore be important for one’s own development in the company. 

Companies are only confronted with the task of planning a company organization “on the green table” for the first time in the start-up phase. In this initial phase, however, startups are usually dominated by issues other than the form of organization. In this case, “many are responsible for many things”. In contrast, clear task descriptions for organizational units and job profiles for employees (also called job descriptions) are lacking. With increasing company size, the “pains” of a missing organizational structure become visible and lead to the necessary professionalisation through the development of a company organization. In already established companies – as already indicated – the need for reorganization or restructuring arises when corporate goals are changed and new strategic directions are developed. In this case, the operational and organizational structure must be adapted accordingly. cc

Memory Box  There is no one best way to structure a business! 

The decisions made in the course of a reorganization process influence each other and each entail advantages and disadvantages. This is also referred to as trade-offs. Since companies only undertake such restructuring processes at intervals of several years, they often have consulting companies accompany them. These usually have more experience in managing such change processes. Human resources consultancies are also frequently called in to determine which of the company’s own managers and employees have the highest potential for a next career step. The decisions that need to be made and the factors that influence them are shown in Fig. 8.2.

8.2 Business Process and Organizational Structure Factors influencing organizational development  Purpose, vision, mission, targets, strategy

497 Decision fields

 Size of the company (number of employees, branches, countries served; level of sales)

 Primary organizational criterion as the basis for department formation at the top management level (product-related, functional, regional and/or customerrelated)

 Scope of the company´s value chain (e.g. R&D, procurement, production, marketing, sales, logistics)

 One-dimensional vs. multi-dimensional structure (e.g. matrix, tensor organization)

 Degree of internationalization (number of countries served, type of involvement in different countries, e.g. with R&D, procurement, production, marketing, sales, logistics)

 Number of hierarchy levels (flat vs. deep hierarchy)

 Corporate culture, "history of the company", preferences of senior management  Complexity of the product/service portfolio (number of brands or product lines, consulting intensity of the offering, etc.)  Type/composition of the product/service portfolio (consumer goods, industrial goods and/or services)  Competitive situation and, as a result, the necessary speed of decision-making  Expectations of managers and employees (motivating factors such as flat hierarchies, fast decision-making, high level of responsibility, agile management, empowered teams)

 Size of span of control in terms of the number of direct reports a manager should have  Determination of hierarchical superiority and subordination, (i.e., who reports to whom and who may delegate to whom?)  Degree of centralization of decision-making (degree to which decision-making authority is concentrated at one point in the company, such as at headquarters) or decentralization of decision-making (where it is delegated to employees at lower hierarchical levels and/or in other offices, e.g., abroad)  Degree of formalization in which central rules, guidelines and regulations are defined for the various behavioral areas of a company (e.g. on the subject of compliance, sustainability, but also on the dress code)

Fig. 8.2  Influencing factors and decision fields of organizational development

The type of primary organizational form is defined by the criterion according to which a company is structured at the highest or second highest management level. The second highest hierarchical level is to be considered if – as is the case in Fig. 8.1 – the highest management level itself is not further subdivided. Depending on the criteria chosen, a distinction must be made between the following concepts: • • • • •

Products: product-oriented organization Functions: functional organization Regions: regional organization Customers: customer-oriented organization Projects: project-oriented organization

If two criteria are used at the same time when designing the organizational structure, this is called a matrix organization. If even three criteria are used, this is called a tensor organization. However, this is rarely the case. A product-oriented organization is shown in Fig. 8.3. This is also called a divisional organization. Here, the company is divided into divisions on the second hierarchical level according to products or product groups. In this way, all functions associated with a particular product group are brought together organizationally.

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Top management Level 1 Cars

Services

Staff unit controlling

Trucks

Level 2 Production

Production

Marketing

Marketing

Level 3

Level 4

Fig. 8.3  Basic form of a product-oriented organization Top management Level 1 Procurement

Production

Controlling

Marketing

Level 2 Packaging components

Raw materials

ProductA

ProductB

Level 3

Level 4

Fig. 8.4  Basic form of a functional organization

The examples of “cars”, “trucks” and “services” in Fig. 8.3 provide a good illustration of this necessity. The requirements for production, marketing and sales often differ greatly between these three product groups. The units defined by products or product groups are often managed as profit centers because they serve their own markets (see Sect. 2.1.2). In sum, it can be stated that specialization in products leads to poorer utilization of synergies between the various product divisions, since in this example all units have their own marketing department. The controlling unit can make an important contribution here in order to set limits to these deficits. In many cases, however, there is only a very low degree of interconnectedness within the company. Figure 8.3 shows that below the organization structured according to product, another criterion is used for the further breakdown, here according to function. A functional organization is shown in Fig.  8.4, where the departments are formed according to the functions, e.g. procurement, production, marketing and controlling. Organization by function also has various advantages and disadvantages. The aim of such a structure is to bring together similar activities. By bundling professional competen-

8.2 Business Process and Organizational Structure

499

cies, a high degree of specialization is to be achieved within the respective department. In this way, functional synergies can be exploited to a high degree. In this case, the marketing department looks after all product areas. One danger is that the marketing generalists do not have a command of the specifics of the individual service areas and are therefore only able to look after them “averagely well”. More networked thinking can be achieved through intensive communication. Project teams and working groups should be set up for this purpose. In addition, the process organization can “force” the functional organizational units to work together intensively through process-oriented linking. In the functional organization, there is usually a cost center for procurement, production and controlling. These areas are managed via budgets. Only in marketing or sales can direct revenues often be generated, so that the profit center solution can be used here (see Sect. 2.1.2). A regional organization was already shown in Fig. 8.1. Here, the departments are formed according to the regions served, e.g. Europe, Asia and America. Level 3 in Fig. 8.1 is of course much more complex in reality than indicated in the diagram. This is because not only North America relies on the functions of procurement, production, marketing, controlling and human resources, but also all other regions. In this model, however, hardly any synergies are leveraged because each unit sets up its own purchasing, production and marketing. One advantage of organizing by region is that all corporate units can better adapt to regional conditions. However, the focus on individual countries or regions can lead to crosscountry or cross-regional synergies not being seen and therefore not being exploited. If there is also a lack of cross-regional exchange of information, this can lead to cost-­intensive parallel developments. Here, too, it is necessary to compensate for these disadvantages through the process organization – within the framework of planning and controlling processes. A customer-oriented organization can be found in Fig. 8.5. Here, the departments are formed according to customer groups. Companies that are active in the B2B and B2C markets at the same time then distinguish, for example, between corporate customers and consumers. This is particularly successful in ensuring a focus on specific customer needs.

Top management Level 1 Customer segment 1

Customer segment 2

Customer segment 3

Level 2 Production

Marketing

Production

Level 3 Level 4

Fig. 8.5  Basic form of a customer-oriented organization

Marketing

Staff unit controlling

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Such a division is often used by consulting companies as well as by banks. In the case of banks, a distinction is often made between private investors, institutional investors as wekk as other companies and consumer groups. In sum, it becomes clear that there can be no superiority of one form of organization. The classification according to the criteria product, region or customer group leads to the fact that it is very easy to determine how profitable the individual business areas are. However, to a large extent the synergy effects already mentioned remain unused here due to the duplication of tasks. For example, in the organizational chart shown in Fig. 8.1, a regional manager must set up and monitor the entire manufacturing and marketing process for his or her products and services. This can involve parallel work across the entire company. At the same time, there can be extensive internal competition between the divisions, which on the one hand increases performance, but at the same time can lead to a waste of resources. The matrix organization links – as already indicated – two different criteria. As shown in Fig.  8.6, this form can be formed, for example, by linking functions and regions. Functions and products or products and regions can also be combined. A distinctive feature of the matrix organization is the emergence of a multi-line system. An employee is subordinate to not one, but two managers with authority to issue directives. The managers working at the intersections of the lines of assignment have to serve “two masters”, as it were, due to this “sandwich position”. In this way, areas of conflict are deliberately institutionalized through overlapping competencies in order to challenge those affected to find creative solutions. All in all, this is intended to overcome departmental egoism and ensure a higher quality of decision-making that goes beyond one’s own region, product or function. In addition, a project organization can be used. This is relevant for companies that concentrate on larger, long-term projects. This is the case, for example, with construction companies that build airports, large residential complexes or industrial complexes. In contrast to the organizational forms described so far, a project organization is only valid for the duration of a project. Such a project organization is often used as an alternative to a product-oriented organization.

Top management

Procurement Western Europe Eastern Europa North America South America

Fig. 8.6  Basic form of a matrix organization

Production

Marketing

Controlling

8.3 Design of the Marketing Organization

501

For a project organization to be justified, the projects to be worked on must fulfill certain characteristics. Only if this is the case is a project organization appropriate. The project has to fulfill one or more of the following criteria: • • • • •

Uniqueness of the project Specific time, financial and personnel requirements Clear distinction from other activities Requirement for a project-specific organization High degree of complexity

Because of these characteristics, projects are not only of great importance to companies. They also present higher risks than routine tasks. For this reason, a project organization is necessary when complex, usually singular tasks with very specific requirements are to be processed. cc

Food for Thought  Check once how the organization is designed, in which you work. Try to get an organizational chart for the whole company. Try to discover in it the elements described here. 

8.3 Design of the Marketing Organization The marketing organization itself governs how the tasks of marketing are organized internally within the company. The same organizational principles that have already been discussed can be used. Figure 8.7 shows a functional marketing organization. Here, the tasks of advertising/sales promotion, sales, customer service, and marketing research are assigned to different organizational units. While advertising/sales promotion is further divided – unconvincingly – into online and offline instruments, sales force is divided by

Staff unit controlling

Head of marketing

Advertising/ sales promotion

Online

Offline

Sales

Customer service

Region south

Fig. 8.7  Basic form of a functional marketing organization

Region north

Marketing research

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region. The function of marketing controlling is designed here as a staff unit that supports the marketing management. The marketing organization can also be structured according to products, product groups or brands, as is the case in Fig. 8.8. This is a product-oriented marketing organization. In this form of organization, the product manager often has a central position. This person has to bundle all activities aimed at these products and/or brands and bring them together to form a consistent market positioning. In this way, a high degree of market proximity is achieved and ensured because the product manager can be evaluated directly on the basis of the success of “his/her brand”. The product-oriented organization ensures the consistent support of a branded product strategy. In this context, it can happen that various tasks within this form of organization may have to be duplicated. In order not to have to install the “marketing research” function separately for each product, this function is designed here as a staff unit. Due to the strong product/ brand focus, conflicts with other functional areas – e.g. production or purchasing – are inevitable. In addition, it can happen that the product managers try to optimize thier results – also at the expense of the entire company. A staff unit controlling can counteract this. If the marketing organization is formed according to customer groups, as is the case in Fig. 8.9, this is a customer-oriented marketing organization. A distinction can be made between private and commercial customers or between bulk buyers, manufacturers

Head of marketing

Staff unit marketing research

Brand 1

Product development

Brand 2

Sales

Staff unit controlling

Brand 3

Advertising

Brand 4

Sales promotion

Fig. 8.8  Basic form of a product-oriented marketing organization

Head of marketing

Staff unit marketing research

Customer group 1

Product developement

Customer group 2

Sales

Advertising

Staff unit controlling

Customer group 3

Sales promotion

Fig. 8.9  Basic form of a customer-oriented marketing organization

Customer group 4

8.3 Design of the Marketing Organization

503

Head of marketing Detergent

Domestic cleaner

Cosmetics

Adhesives

Western Europe Eastern Europe North America South America

Fig. 8.10  Basic form of a marketing matrix organization

(OEMs) and end customers. It can also be divided into large and small customers. If major customers receive special support from managers responsible for them, this is referred to as key account management (cf. Sect. 5.3.2.1). The customer-oriented marketing organization ensures that marketing is consistently geared to the specific requirements of the various customer segments. Here, too, two staff units are involved in order to work with the customer-oriented departments and to exploit possible synergies. Finally, a marketing matrix organization can also be applied, as shown in Fig. 8.10. The advantages and disadvantages that can be associated with this have already been discussed. Memory Box  The organization of the company must be regularly reviewed to determine whether it is still making an optimal contribution to supporting the achievement of the company’s targets and the implementation of the company’s strategies. 

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Things to Keep

• Every company needs an organizational structure and a process organization in order to be able to work efficiently and effectively. • There is no such thing as an ideal form of organization; there are only ever organizational forms that support the achievement of targets and the implementation of a company’s strategies to a greater or lesser extent. • The organizational structure can be formed according to the criteria product, function, region and/or customer group. • If an organization is formed on the same level according to two criteria, a matrix organization is created. • For the development of the marketing organization, the same classification criteria can be used as for the corporate organization. • The organizational form must be regularly reviewed to ensure that it is consistent with the company’s targets and strategies.

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Questions to Check Your Level of Knowledge

1. Is there an “ideal” form of organization? 2. What is meant by reorganization? 3. What is the difference between the organizational structure and the process organization? 4. Give examples for the process organization. Which characteristics have you already experienced yourself? 5. What is the graphical representation of the organizational structure called? 6. According to which criteria can the organizational structure be designed? Name the concepts and list their possible advantages and disadvantages. 7. What is the name given to the form of organization in which two criteria are used to form the organization? What phenomenon is associated with it? 8. What is the organizational form called when three criteria are used? 9. Research examples of the different forms of organization on the Internet on various company websites. 10. What criteria should be used to decide which form of organization should be used? 11. Which forms of organization can be applied in marketing? What are the advantages and disadvantages associated with them? cc

Mega Memory Box  Success in marketing, success in business, success in life always means daring to do something new, trying out the unknown, having courage. 

If you always follow in someone else’s footsteps, you will never overtake them. It’s not just true in marketing: Nothing great has ever been created without enthusiasm. Get excited about what you do – and success will follow!

References Frese, E., Graumann, M., Talaulicara, T., & Theuvsen, L. (2019). Grundlagen der Organisation. Entscheidungsorientiertes Konzept der Organisationsgestaltung (11. Aufl.). Springer Gabler. Kieser, A., & Ebers, M. (2019). Organisationstheorien (8. Aufl.). Kohlhammer. Kieser, A., & Walgenbach, P. (2010). Organisation (6. Aufl.). Schäffer-Poeschel. Kreutzer, R. (2018). Toolbox für marketing und management. Springer Gabler. Kreutzer, R. T. (2022). Toolbox digital business. Springer Gabler. Rahn, H.-J., & Mintert, J. (2019). Unternehmensführung (10. Aufl.). Kiehl. Schreyögg, G., & Geiger, D. (2015). Organisation: Grundlagen moderner Organisationsgestaltung (6. Aufl.). Springer Gabler.

Glossary

ABC analysis  The ABC analysis is a method that divides a population into three classes with regard to certain criteria (such as sales or profitability). The aim is to identify, for example, those products, customer groups or countries that contribute most (class A), on average (B) or little (C) to the company’s success. Above-the-line communication (ATL) Above-the-line communication generally includes the classic forms of communication or the classic communication media and the classic communication channels. Focusing on the advertising media, ATL includes newspapers, magazines, TV, radio, cinemas and billboards. The corresponding advertising media are advertisements, TV, radio, cinema spots and posters. Acquisition  Acquisition is the totality of a company’s activities aimed at motivating a prospective customer to make an initial purchase or an existing customer to make a repeat purchase. Additional benefit  The additional benefit represents the benefit of a product that goes beyond a technical-functional benefit and is also called prestige or status benefit. Address  The postal address consists of first and last name (for decision-makers also function and company), street, house number and postal code with city. Frequently, e-mail addresses and telephone and fax numbers are also attributed to the address. The address is indispensable for many forms of dialogue communication (e.g. advertising letters, e-mails). Adressverlag  An address publisher is an enterprise, which specialized in the production, care, refinement and letting and/or the sales of addresses. These addresses include private individuals, companies, decision-makers in companies, self-employed persons as well as members of liberal professions. Advertising banner  An advertising banner is a piece of advertising information that is embedded in a website. This integration can take place either by embedding the banner in the layout or by a (temporary) overlay of the site by the a­ dvertising banner. The banner refers to the advertising company as a hyperlink and is activated by clicking on it.

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 R. T. Kreutzer, Practice-Oriented Marketing, https://doi.org/10.1007/978-3-658-39717-3

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Advertising media  Advertising media is the medium that transports various advertising materials to the target persons. Advertising media include TV, radio, newspapers, magazines, internet or movie theatres. Advertising medium  The advertising medium serves as the basis for the transmission of an advertising message and is, for example, a TV or radio spot, an advertisement, an insert or an advertising banner. Advertising message  The advertising message is the core of an advertising statement that an advertiser wants to convey to the target group. Advertising Advertising is a communication instrument through which information, influence and control objectives are to be achieved with regard to the company’s core performance with the target groups of interested parties, target customers and actual customers. In comparison to sales promotion, for example, advertising usually has a longer-term focus. Affiliate marketing  Affiliate marketing (derived from “to affiliate” in the sense of “connected, associated”) usually involves online-based sales cooperation. Here, a provider makes advertising material available to another company so that this partner (the “affiliate”) integrates it on its websites to promote its own offering. In this way, an attempt is made to draw Internet users’ attention to the company’s own online offering. After-sales service  After-sales service refers to various services that a company offers its customers after the purchase in the use phase. These include chargeable or free service hotlines, training, maintenance contracts, etc. After-sales services are intended to strengthen customer loyalty and prepare and promote further purchases (more sell, cross-sell, up-sell). AIDA formula The AIDA formula is a stage model of the communication effect, in which the stages Attention, Interest, Desire and Action are distinguished. All-you-can-afford method  The all-you-can-afford method is an approach to advertising budget planning in which the advertising budget is the residual figure after all other expenses have already been deducted from the entrepreneurial budget. Consequently, it asks, “How much advertising can we afford?” Ambient Advertising (also Ambient Media, Ambient Marketing)  Ambient Advertising is a form of advertising that is placed in the direct living environment of the target group to be addressed (therefore “ambient” for the target person “surrounding”). People are addressed with advertising in places and situations of everyday life where they do not classically expect advertising. ASIDAS  ASIDAS is the further development of the AIDA formula. In the classic stage model of the communication effect with the stages Attention, Interest, Desire and Action, the activities Search (for offline/online search processes) and Share (for sharing experiences with others) were integrated into the process. Assortment depth (also program depth)  The assortment depth describes the number of different products or product variants that a company offers within a product line.

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Assortment  The assortment is formed by the totality of products and services offered by a trading company.The assortment width is defined by the number of different product lines or product categories that a company offers in parallel. Authorised dealer system (also licensed trade or concessionary trade)  In authorised dealer systems, authorised dealers are independent traders entrusted with the (exclusive) marketing of a manufacturer’s products. The dealer is obliged to promote sales in accordance with the manufacturer’s concept. Balanced Scorecard (BSC) The Balanced Scorecard is a multi-dimensional target framework and forms a control cockpit for the entire company. In addition to financial targets, process-, customer- and employee-related targets are usually also defined. The central idea of the BSC is the consideration of several strategic target perspectives on a company level. In this way, the expectations of various stakeholders can be taken into account simultaneously. Basic benefit  Basic benefit describes the technical and functional benefit of a product. These include, for example, the cleaning effect of a soap and the protective and warming function of clothing. Below-the-line communication (BTL)  Below-the-line communication usually includes all non-classical.The non-classical forms of communication or the non-­classical communication media and the non-classical communication channels are counted. If we focus on the advertising media, BTL includes telephone marketing, mailings and online marketing. The corresponding advertising media are telephone calls, mailings, emails, online banners, etc. Benchmark  A benchmark represents a “standard of comparison” against which a company can compare its own performance in order to identify performance gaps or performance advantages. Benchmarking  Benchmarking is a method of comparing the performance of one’s own company with the performance of other parts of one’s own company or other companies in the same industry, other industries and/or from other countries. The objective is to gain indications for the further development of one’s own company. Benefit  Benefit refers to the degree of need satisfaction that arises for an individual, a group or an organizational unit from the use of a service, the purchase of a product or the acquisition of a service. A distinction is made between basic and additional benefits. BenefitCf  . benefit Bivariate method  In a bivariate method, exactly two variables are analysed simultaneously in a statistical calculation (e.g. age and gender). Blog (also Weblog)  The term weblog or abbreviated blog is a made-up word from web and log(book). The weblog is a web diary that is kept as a website. This logbook corresponds to a journal and includes entries, comments and notes. Blogs are based on easy-to-use software that enables even unskilled users to publish their own contributions quickly and without cost on the Internet.

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Boutique  Boutique is a form of retail operation characterized by a small shop with a limited assortment geared to a target group. A high intensity of consulting is often accompanied by a higher price level. Brainstorming  Brainstorming is a creativity technique to quickly come up with innovative solutions in meetings. Brand Academy (also Brand Academy)  Brand Academy is a space where the brand is staged by the company itself with regard to all relevant senses. The brand can literally be seen, heard, tasted, felt and/or smelled there. In addition to conveying knowledge about the brand, a dominant goal is to inspire enthusiasm for the brand on all sensory levels. Depending on the respective design, these stagings of the brand are only open to the company’s own employees and managers, external service partners and/or the entire interested general public. Brand AcademyCf  . Brand Academy Brand Behavior  Brand Behavior describes the behavior of managers and employees that is aligned with brand requirements and is also equally customer and sales oriented. While internal branding addresses the management task, brand behavior represents the result of all internal branding measures and thus functions as a target variable to be monitored. Brand Building  The development of a brand is called brand building. The first step is to develop the building blocks that are to shape the brand. This includes, for example, the colors used, which appear in the logo, in packaging design and in communication. The use of scent as well as the tonality in the address also characterize a brand. The totality of the individual brand components ideally creates a convincing brand identity. This is communicated internally and externally through various measures. Brand Citizenship Behavior (also brand citizenship) Brand citizenship behavior is understood to be various generic, i.e. brand and industry-independent, behaviors of managers and employees that underpin the development of a brand identity and are to be supported by appropriate management behavior. Brand community (also brand community)  Brand community is understood as a group of people who are characterized by a common brand use and are in contact with each other. These groups can operate online and offline. Brand value chain  The brand value chain measures the success of the marketing instruments used in a differentiated manner over time using KPIs (key performance indicators). The brand value chain provides information about the success of the marketing instruments used in the respective target group and at the same time defines the objectives considered to be particularly relevant. On the one hand, the brand value chain includes value-creating activities. The investments made here include, for example, campaigns to build brand awareness and to boost the image. On the other hand, the brand value chain also includes value-creating activities. These include – in the sense of “return on investment” – purchases by customers and their recommendations.

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Brand  A brand is a name or term, often associated with a particular sign or symbol, which is intended to help differentiate a product from its competitors in the eyes of the relevant target audience. Branded goods (also manufacturer’s brand)  Branded goods are products that are distinguished by a marking and/or a brand name and thus have a uniform appearance – often across national borders and over longer periods of time. They are characterised by a relatively high quality or by their own high quality standards. This quality orientation goes hand in hand with a relatively high pricing. The “relative” refers to the relevant competitive offers. The “sender” of the branded products is the manufacturing company that designs and produces the branded product or has it produced. For this reason, the term “manufacturer’s brand” is used instead of “branded article” – in contrast to “private label”. Branding  Branding refers to the process of creating a brand, in the course of which the brand is identified (e.g. by means of brand and/or word marks). The aim of branding is to achieve distinctiveness and thus differentiation of one’s own offering in the competitive environment. Break-even point  The break-even point is where the sales and total cost curves of a product or other service intersect. At this point, neither a profit nor a loss is generated. From the quantity marked by the break-even point, the sales achieved exceed the costs, so that the company reaches the profit zone. Briefing  The briefing is the written or verbal description by a client of the objective and the framework conditions relevant to achieving the objective. A briefing can be for a communication campaign, for the establishment of a foreign branch or for the development of a new product. Briefings can be used by superiors as target setting in the sense of an order to their employees. A briefing can be used by managers as an assignment for their employees. A briefing usually contains condensed information about the desired target state, the available resources (time, budget, employees) as well as other relevant information (e.g. with regard to the context of the task processing). Business marketing  Business marketing is when the use of marketing in business is done with the aim of making profits. Business-to-business marketing (B2B marketing, B-to-B marketing) Business-to-­ business marketing is the concept of a market-oriented structuring of business relationships between companies. Business-to-consumer marketing (B2C marketing, B-to-C marketing)  Business-to-­ consumer marketing is the concept of a market-oriented structuring of business relationships between companies on the one hand and consumers on the other. Buyer power  Buyer power describes the ability of buyers to enforce their own interests to a large extent due to their superior market situation vis-à-vis suppliers. Buyer’s market  In a buyer’s market, the buyer has the dominant market position due to oversupply. Buying Center  The Buying Center represents an intellectual construct in which the role holders involved in procurement processes in a company are considered together by the

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offering organization. In the Buying center five different role carriers are differentiated: Users, Buyers, Influencers, Decision Makers and Gatekeepers. The idea of the buying center concept is to take into account the different expectations and goals of these role carriers simultaneously when addressing them through communication. Buzz marketing Buzz marketing is based on the principle of friendship advertising. “Buzz” literally means “buzz” and means that as many people as possible should talk intensively in public and/or in their circle of friends and acquaintances about the advantages of products or services. Buzz marketing involves the more or less intensive involvement of a company’s own customers or persons appearing as such, who actively or passively highlight a particular offer in their respective environment in order to increase its awareness and trigger corresponding purchasing processes. Call center (see also customer service center)  The call center is an organizational unit of a company that is responsible for receiving inquiries, complaints, orders, etc. from prospective customers and customers by telephone. Capital goods  Capital goods are products and services acquired by individuals or organisations for the production of other products or services and thus put to productive use. Car Clinic  Car Clinic is a focus group method frequently used in the automotive sector. The test persons are invited to a studio, for example, to evaluate a new car model that is presented as a prototype. If this is ready for use, the Car Clinic can also include test drives. This is to determine how a new model is “received” by the customer. Cash discount (also cash rebate)  Cash discount is a price reduction granted if payment of an invoice is made within a certain period of time. Category Management (CM)  Category Management interprets product or merchandise groups (categories) as (strategic) business units. For these, manufacturers and retailers jointly develop processes in order to achieve the best possible product or category performance through coordinated alignment with customer needs. This is intended to increase sales and profits. Category management is an essential prerequisite for Efficient Consumer Response (ECR). Churn management  Churn is a made-up word made up of “change” and “turn”. Churn management refers to the process of trying to “turn around” a lost customer so that he withdraws his notice or reverses his switch to a competitor. Closed innovation model  In the closed innovation model, companies primarily develop and market ideas that have been generated within the company itself (especially in the R&D area). Closed-loop approach  A closed-loop approach is a closed cycle that starts with the goals to be achieved. In order to achieve the desired goals, appropriate measures are derived. The implementation of these measures leads to certain results. These results are to be analyzed in order to identify optimization opportunities. The insights gained can lead to the adjustment of goals and the development of appropriately optimized measures. This closed loop provides an indispensable contribution to a learning organization.

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511

Collectible cards Collectible cards are paper-based concepts of customer loyalty on which purchases – usually independent of person and time – are recorded by means of stamps, tokens or similar. Commercial agents  Commercial agents are legally independent tradespeople entrusted with brokering business for other companies or concluding such business on their behalf. They thus act on behalf of and for the account of one or more companies. For their services, they primarily receive variable remuneration based on the sales achieved or, more generally, on the achievement of targets. Commission agent  Commission agents undertake on a professional basis to buy or sell goods or securities for the account of another (principal) in their own name. They are subject to special instructions from the principal (e.g. in the form of price guidelines) and receive a commission (commission), usually based on turnover, for contracts concluded. Communication policy Communication policy includes the planning, organization, implementation and control of operational activities, which comprise the development and implementation of all measures for the presentation of the company, its key players and its created products and services in the market and in the wider public. This includes in particular advertising, sales promotion and public relations. Competition  Competition describes the rivalry relationships between participants in economic processes in the achievement of a company’s own goals. These goals can be pursued, for example, in sales and procurement markets, but also in the general public. Competitive analysis (also competitor analysis)  Competitive analysis seeks to identify competitors’ objectives, strategies and instruments, as well as underlying resources. By determining the relative strengths and weaknesses of one’s own company in a competitive comparison, one’s own competitive position is determined. Competitive parity method (also known as the competitive parity method)  In the competitive parity method, the advertising budget of competitors is the central reference value for determining the company’s own advertising budget. Competitor analysisCf  . competitive analysis Compliance  The term “compliance” can be understood as “adherence to rules” with regard to the observance of laws, but also of specific guidelines within companies. Concept test  In the context of a concept test, no physical product is evaluated. In order to carry out a test, only the product concept is described (usually including drawings) in order to give the test person an idea of the product, which he is to evaluate. Consumable good Consumable good is a consumer good intended for immediate consumption. Consumer goods  Consumer goods are goods intended for repeated or long-term use. Consumer goods Consumer goods are physical products that individuals or private households purchase in order to put them to a consumptive use. This means that these products are intended for own use or consumption and are not subject to commercial use.

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Consumer market  The consumer market is a type of retail outlet that offers a wide range of products across all sectors, offers little advice and hardly any other services and has a low-priced range of products in an open display. Self-service is dominant in this type of business, which is often located in suburban areas. Consumer panel  The consumer panel essentially comprises a regular survey of identical consumers on their information and purchasing behaviour. The data obtained in this way enables precise statements to be made about changes in the information and purchasing behaviour of end consumers, because the identical people are surveyed again and again. Consumer panels can relate to consumer goods, durables and services. Content marketing  Content marketing is a form of communication in which the target persons and target groups are offered informative, advisory and/or entertaining content, which often only has an indirect reference to the service offering of the communicating company. In this way, the company wants to position itself as a high-performance partner in a certain environment – without directly aiming at a purchase. The overriding goal of content marketing is, however, also here to trigger purchases or other desired activities of the target persons. Contribution margin  Contribution margin is the portion of sales (excluding value-­added tax) that remains after deduction of the costs directly attributable to the respective reference object (e.g. assortment, product, region, customer, sales channel) to cover all other costs and to generate profit. Convenience Good  Convenience goods are products that focus on the convenience of shopping. Since the customer buys the products regularly, he does not want to spend a lot of time searching and selecting and consequently minimizes the procurement effort. Therefore, these products are bought habitually. Convenience store (also known as neighborhood store)  Convenience store is a type of retail operation that is characterized by spatial proximity to the customer and a limited range of groceries and other everyday products. Longer opening hours and special services are also frequently available. Conversion rate (also response rate) The conversion rate shows the percentage of people who have shown a certain behaviour (e.g. purchase, e-newsletter subscription, offer request, app download) – in relation to the total number of people addressed by a campaign. It is identical to the response rate. Corporate Behavior (CB)  Corporate Behavior describes the company-related goal of ensuring that all members of the company behave as inconsistently as possible, both internally and externally, in line with the company’s self-image, its vision and its values. The basis for this is provided by corresponding behavioral guidelines, also known as codes of conduct. This promotes the creation of a consistent corporate identity. Corporate Communications (CC)  Corporate Communications describes the company-­ related goal of ensuring that all communication measures used by a company are coordinated and interlinked. The aim is to create a consistent image in the public eye and within the company itself that is in line with the company’s objectives. Corporate communications contribute to the creation of a consistent corporate identity.

Glossary

513

Corporate culture (also known as corporate culture)  Corporate culture describes the culture to be perceived in a company. This culture is shaped by the lived relationships of managers and employees with each other and with external service partners (including customers, suppliers, competitors). This culture is influenced by the lived – not only the communicated – corporate values and the thought and behavior patterns that have grown and are lived in the company. Corporate Design (CD)  Corporate Design describes the company-related goal that all design elements used by a company are coordinated and interlocked with each other. This should promote the creation of a consistent corporate identity. For this purpose, for example, the typefaces and font sizes to be used as well as the colours and logos for the corporate appearance are bindingly defined in order to create a uniform visual appearance of the entire company. In addition, their use in advertisements, in brochures, in mailings, on the website, etc. is precisely prescribed. Corporate identity (CI, also corporate identity) Corporate identity describes the desired, consistent and credible overall appearance of a company. Through this, a company wants to differentiate itself internally and externally in the competitive environment. This overall appearance is characterized by the appearance (Corporate Design), the communicative measures (Corporate Communications) as well as the behavior of all employees (Corporate Behavior). Corporate identity is therefore not an instrument, but a target state. Corporate philosophy  The corporate philosophy is a foundation of the corporate culture and defines, through a corporate vision and/or mission statement, the value basis of the company’s activities and the direction of the company’s further development. Corporate publishing  Corporate publishing refers to a journalistically prepared, often periodically published form of corporate communication that is carried out through the company’s own media. In addition to employee, customer and member magazines, this also includes, for example, magazines aimed at dealers involved in sales or at investors. Corporate publishing is a form of content marketing. Corporate Social Responsibility (CSR)  Corporate Social Responsibility refers to the social responsibility exercised by companies, which describes the voluntary contribution made by companies to sustainable economic activity that goes beyond mere compliance with statutory regulations. Cost center A cost center is an organizational service area within a company that is delimited according to certain criteria (e.g. products/services, customers, regions, functions). It does not have an independent market function and therefore does not bear any profit and loss responsibility. Consequently, cost centers cannot be managed on the basis of the market successes achieved, but only on the basis of budgets, which are used to achieve specific goals. Cost leadership  Cost leadership is a competitive position of a company based on a cost advantage over relevant competitors.The customer relationship life cycle divides the relationship of an individual to a company defined over time into the three phases of prospect management, customer retention/customer development management and

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win-back management. In the course of a CRM, different marketing strategies and different forms of the marketing diamond are used within the framework of these phases. Cost per interest (CPI)  Cost per interest describes the costs per newly acquired prospect. Cost per interest is determined by dividing the acquisition costs of a campaign by the number of prospects acquired. Cost per order (CPO)  Cost per order is determined by dividing the acquisition costs of a promotion by the number of orders won as a result. Cost per thousand (CPM)  The cost per thousand expresses how much it costs a company to reach, for example, 1000 readers or viewers. The price per thousand serves as a benchmark for the profitability of a medium. It is determined by dividing the costs of the placement by the number of advertising medium contacts and multiplying the result by 1000. In online marketing, the CPM (Cost per Mille) value describes the costs that arise so that, for example, 1000 people have the chance to see an online banner. Coupon ad  In a coupon ad, a coupon is incorporated into an ad as a response instrument. This coupon is to be sent as a response medium to the offering company, to be used online or to be presented in the trade in order to receive the promised benefit. Coupon  A coupon is a reaction medium in the form of a credential with which the holder can obtain certain benefits. Coupons can, for example, take the form of a discount, but also access to certain services, in paper form or virtually – as an e-coupon. Couponing  Couponing is a measure in which an issuer provides a selected group of people with an entitlement card (equivalent to the coupon) through a medium. When this is used, an online or offline acceptance point grants a specific benefit during a defined period of time if the target person shows a certain behaviour. Cross-sell  Cross-sell aims to motivate an already acquired customer to purchase other products or services from the same company. In this way, the company aims to achieve higher sales with a customer by having him purchase from different product ranges. Customer card  A customer card is a concept usually designed as a plastic card that is used for customer loyalty. It is a standardized card the size of a credit or giro card that has various storage media (barcode, magnetic strip, chip). This makes it possible to identify the customer individually when using the card. Customer card, virtual  A virtual customer card is not physically tangible and allows, for example, an online collection of points. Customer Centricity  Customer Centricity is a conceptual approach to the development and marketing of products and services that is consistently oriented towards the current and future expectations of the target groups. Consistent customer centricity is intended to secure value creation for the company in the long term.Customer experience is the term used to describe the experiences that a customer has had at the various customer touchpoints of a company. The customer experience thus summarizes all the experiences of a customer that he has gained at the POS, on the website, in the online shop, in the service center, etc. The customer experience is also referred to as the customer experience.

Glossary

515

Customer club  In a customer club, a company organizes a range of services for customers that goes beyond the company’s core services and does not just involve issuing a customer card. This is accompanied by continuous, dialogue-oriented communication. Customer Journey  The term customer journey describes the path that a (potential) customer takes to make a purchase from a company. This includes the customer touchpoints with the company as well as many other points of contact (e.g. comparison platforms) that a potential customer uses. The customer journey can include several online and offline touchpoints. Customer Life CycleCf  . customer relationship life cycle Customer lifetime value (CLV)  The customer lifetime value represents the sum of the value contributions of a customer determined according to various criteria aggregated over the duration of the relationship with a company. This value can be determined for consumers and companies alike. Customer loyalty management  Customer loyalty management is the planning, organization, implementation and control of all measures that are intended to bind a person or a company to a company in the long term. For this purpose, various measures are used by the offering company. Customer loyalty management also describes a phase in the customer relationship life cycle. Customer loyalty  Customer loyalty describes a company’s goal of creating a relationship between a customer and a company in such a way that it is sustainable, profitable and, ideally, the customer continually increases his or her share of wallet with that company. Customer magazine  A customer magazine is a communication medium in the form of a magazine or newspaper, which is aimed at the company’s own customers and is usually made available to them free of charge. Customer management, value-oriented  Value-oriented customer management is essentially about selecting and processing profitable customer relationships. The tasks of value-oriented customer management include the selection, development, design, maintenance and termination of business relationships with individual customers or customer groups on the basis of their value contributions to defined corporate objectives. Value-based customer management thus encompasses the selection of customers to be acquired and retained as well as the design of customer support oriented to the customer relationship life cycle. Customer Relationship Management (CRM)  Customer Relationship Management is a conceptual approach to marketing that aims to provide holistic, individual customeroriented support for target persons within the framework of the customer relationship life cycle by means of integrated marketing measures. In essence, it is about – oriented on the terms “customer”, “relationship” and “management” – the goal-oriented shaping of relationships with customers. The basis for this is a database that provides the information required to create added value in the relationship between the company and its customers. Customer service center (also customer care center or narrow call center)  The customer service center is an organizational unit that handles a wide variety of incoming

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and outgoing communication channels from prospects and customers. In addition to the telephone, this also includes communication via letters, e-mail and fax as well as the exchange via blogs, communities and social media. Customer Touchpoints  Customer touchpoints represent the interfaces of a company with which a customer comes into contact with a company. These include emails, online banners, keyword ads, print ads, inserts, billboards, social media posts, salespeople, service center staff, TV and radio spots, and more. These are the touch points to be designed by the company itself. In addition, there are other contact points that are beyond the direct influence of the company. These include, for example, price comparison sites, rating platforms and customer-driven dialogues in social media. Customer value  The customer value is the yardstick for assessing the value of a customer relationship. Various monetary and non-monetary parameters can be used to determine customer value. The customer value, for example in the form of the customer lifetime value (CLV), indicates the contribution margin that a customer realizes during his entire “customer life”. In addition to historical sales, expected future sales are also usually taken into account.In a store test, products are sold on a test basis in a limited number of stores (often 10–30) within the real range of a retail outlet. The aim is to determine as quickly as possible how the acceptance of a new product turns out. Dashboard  A dashboard is a control cockpit for managers and/or employees that provides detailed information. Marketing dashboards provide such information, for example, about customer groups or individual customers. On the basis of such information, a customer service center agent can carry out an individualized customer approach and support. Demand  Demand is understood to be demand based on purchasing power. Department store  Department store is a form of retail operation that has large sales areas (often from approx. 3000 sqm) and offers a wide range of goods across all sectors under the motto “everything under one roof”. Different price ranges are available in an open presentation of goods with advice and self-service. Department stores are frequently found in the city centre. Department store  The department store is a type of retail outlet that usually has extensive sales areas in the city centre and a deeply structured, homogeneous range of products. Advice and open presentation of goods in self-service as well as different price ranges can be found here. Such department stores can concentrate on fashion, for example. Dialogue advertising/direct advertising Dialogue or direct advertising is used when communication instruments with a direct effect or aimed at an immediate dialogue are used to achieve advertising objectives. Dialogue marketing (also direct marketing)  Dialogue marketing provides a variety of instruments for establishing direct contact with interested parties and customers. The dialogue marketing instruments aim to open a direct relationship and thus, as it were, a dialogue with the addressed target persons. Since a “direct” reaction of the addressed person is aimed for, the terms direct marketing and dialogue marketing are mostly used synonymously.

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Direct MailCf  . mailing Direct response ad  A direct response ad is placed in print media (newspaper, magazine) and is intended to motivate the reader to respond immediately (direct response). This is done either by specifying a response channel (telephone or fax number, corporate website, e-mail and/or postal address or a social media account) or the reader uses a response element of the ad itself (e.g. a coupon or a card). This response element may be a coupon or tip-on card designed to facilitate the response of the person being addressed. By integrating such response elements, a classic ad becomes a DR ad. Direct response spot  A direct response spot, which is placed on TV, radio and sometimes also in cinemas, is intended to motivate viewers or listeners to react immediately (direct response). For this purpose, a telephone or fax number, an e-mail or postal address or a corporate website are given to which the recipient should directly respond. In addition, the specification of a social media account, for example, can invite dialogue. This turns a TV spot into a DR TV spot and a radio spot into a DR radio spot. In the cinema, there is often the request: “Buy product xy directly here”! Direct-to-Consumer  Direct-to-Consumer (D-to-C) refers to an approach whereby companies market their services directly to consumers, bypassing retailers, wholesalers or other intermediaries. Discounter  Discounter is a form of retail operation in which a very narrow range of goods geared to rapid turnover is usually offered at low prices in self-service. Distribution policy  Distribution policy includes the planning, organization, execution and control of entrepreneurial activities that comprise the development and implementation of the acquisition and physical distribution of goods from the manufacturer and/ or retailer to the end customer. This includes, in particular, the selection of sales channels, the involvement of sales agents and sales helpers, and the development of the necessary logistics. Distribution tie system In distribution tie systems, there is an individual contractual agreement between the manufacturer and the distribution partners. It regulates the sale of goods and imposes certain rights and obligations on the contracting parties (manufacturer and retailer). Distribution, acquisitive  Acquisitive distribution includes the measures of distribution policy that are used to initiate and secure relationships with prospects and customers. Distribution, physical Physical distribution comprises the physical transfer of goods from the manufacturer to the end customer. Physical distribution involves deciding which logistics solutions are to be provided by which potential partners. Diversification  Diversification involves expanding a company’s range of services and the market it serves. There are three types of diversification. In the case of horizontal diversification, the company remains active at the same economic level even if the service program is expanded. In vertical diversification, the company becomes active at an upstream and/or downstream economic level. In the case of lateral diversification, the company enters a new field of activity that has no objective connection to the previous fields of activity.

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Drop shipment  Drop shipment is a form of distribution in which a (wholesale) trader has products (especially bulk goods, such as steel or coal) delivered directly from the manufacturer to the buyer. Dynamic Pricing  Dynamic Pricing is a special form of personal and temporal price differentiation. The prices offered are changed throughout the day. In addition, the price varies depending on other factors of the potential buyer. This can result in different prices for each buyer. E-commerce (also mail order, distance selling)  E-commerce refers to the buying and selling of products and services on online platforms. In essence, it is mail order or distance selling, because it involves buying and selling “at a distance”. If the purchase is made online, it is referred to as e-commerce – regardless of whether the ordered goods are shipped online or offline. Effectiveness  Effectiveness is about the question, “Doing the right things?” Effectiveness looks at whether an action or intermediate goal contributes positively to a higher-level goal. Thus, it is about the “degree of effectiveness”. Efficiency  Efficiency is about the question, “Doing the things right?” Efficiency looks at the input-output relationship – whether or not the outcome of that process contributes to the achievement of business objectives. This addresses the “degree of economic efficiency”. Efficient Assortment (EA)  Efficient Assortment involves the customer-oriented design of assortments at the POS in the sense of demand-oriented inventory and shelf optimization. Efficient Consumer Response (ECR)  In the concept of Efficient Consumer Response, the process chain from manufacturer to retailer to consumer is viewed holistically from the customer’s perspective. The goal is to quickly and accurately determine the wishes of the end consumer in order to meet them in a cost-efficient manner. Efficient Product Introduction (EPI)  In Efficient Product Introduction, the processes from product development to market launch are intensively coordinated between manufacturer and retailer. Various testing options are used to enable a faster response to consumer purchasing behavior. Efficient Promotions (EP) Efficient Promotions is about close coordination of sales promotion activities between manufacturer and retailer in order to achieve the best possible effect of the means used. Efficient Replenishment (ER)  Efficient replenishment is a specific model of cooperation between retailers and manufacturers. It is not the retailer who calls off goods from the manufacturer, but the manufacturer has direct access to the retailer’s sales and delivers directly. The prerequisite for this is direct data access by the manufacturer to the relevant sales data of the retailer. E-mail  E-mail is the abbreviation for electronic mail and refers to a message exchanged over electronic networks. Employer brandCf  . (employer branding)

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Employer branding (also employer brand)  Employer branding involves the internal development and external positioning of a company based on brand strategy with the aim of positioning it as an attractive and credible employer. A coordinated mix of communication instruments is used to build this up. The result should be an attractive employer brand that is effective both internally and externally. Event marketing  Event marketing involves the planning, organization, implementation and control of events. These are carried out by companies for specific target groups and can, for example, be aimed at interested parties, customers, decision-­makers and/ or multipliers. Exclusive distribution system  In exclusive distribution systems, the distribution of the products and/or services of a manufacturer or part of this programme in a defined territory is carried out by only one buyer. Exclusive distribution rights are granted to one partner per territory, thereby enforcing exclusive distribution. Experience curve effect  The experience curve effect describes the empirically proven phenomenon that every doubling of the production volume of a product over time is accompanied by a cost reduction potential of 20–30% in terms of unit costs related to its value added. In other words, the greater the quantity that a company produces of the identical product, the cheaper its production tends to be. In order to exploit the experience curve effects, various measures must be employed. Experiment  The experiment is a methodically designed investigation to systematically obtain data on cause-effect relationships between variables. Eye tracking  Eye tracking is a method of marketing research by which eye movements are recorded when looking at a document (e.g. a mailing or an advertisement) or during online research in order to record the process of information intake for the optimisation of communication media. Flat rate  A flat rate is a fixed price that covers the unlimited use of a good. It is used in telecommunications and in the streaming sector, among others. Focus groups  Focus groups describe a group of people who discuss selected topics (e.g. innovation projects, communication strategies) in a plenary session in order to come up with new ideas. Follow-the-cheap strategy With the follow-the-cheap strategy, a product is initially launched at a low price in order to trigger as many initial or test purchases as possible. At a later point in time, a one-time price increase is made to the price level considered to be target-oriented without, as a rule, further qualitative developments of the offer taking place. This price level is then maintained in the long term. Follow-the-free strategy  In the follow-the-free strategy, a company initially offers a service free of charge in order to build up a large customer base and achieve a customer loyalty effect. At a later stage, the same services are priced and/or higher-value offers are made to customers, while the free service is dropped. Franchise (also franchising)  The franchise concept involves a contractual relationship between a franchisor and several independent franchisees. The concept is usually based on a specific product or service, a business idea, a brand name or a patent developed

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by the franchisor (franchise system). The franchisor allows the franchisees to use this concept (incl. advertising, services, supply) for a fee. Freemium  Freemium is a made-up word that is composed of the terms “free” for “free of charge” and “premium” for “premium” or “surcharge”. Freemium refers to a pricing strategy in which a basic product is offered free of charge. Anyone who wants to use the full product and/or enhancements must pay for it. Friendship advertising Friendship advertising is a form of customer acquisition in which a customer acquires a non-customer as a buyer. In more recent forms, however, non-customers can also acquire other non-customers as buyers. The referrer usually receives an advertising premium. Fundraising (also donation solicitation) Fundraising aims at obtaining financial resources that charitable, non-profit organizations need to achieve their goals. Here we are talking about non-profit organizations. Genre  The genre describes the value of a product program or an assortment. For example, a distinction must be made between a location in the premium segment and a positioning as the lowest-priced provider. Goal  A goal represents a concretization of a desired state in the future. A goal thus provides the central points of orientation for human action – in the corporate sphere as well as in private life. High-interest product  High-interest products are products that are of high interest to the buyer or user because of their nature, their environment of use or consumption, their long-term nature and/or their price. Human resources policy  Human resources policy encompasses the planning, organization, implementation and control of corporate measures that help to give managers and employees the same status in the value chain as other marketing instruments in order to achieve a targeted market position. The goal of human resources policy is often the creation of an internal branding. Image  An image (in the sense of a picture) is the sum of all ideas, knowledge, experiences of a person or a group of persons, which they have towards an object (company, service, product, brand) or towards a person or a group of persons (actor, orchestra). The image has a high degree of action control. Inbound telephone marketing (also known as passive telephone marketing) In inbound telephone marketing, a company responds to incoming phone calls. Indirect sales  In indirect sales, the goods produced by the producer are distributed to final consumers through the intermediary of traders and/or other service providers. Influencer marketing (also social influencer management) Influencer marketing makes use of the two-step flow model. Here, opinion leaders are specifically integrated into the information process to the “final” target persons. Since an opinion leader can often reach several people, he assumes the function of a multiplier. Thus, this person can create value for the company through positive statements – or destroy it through negative statements.

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Innovation  Innovation stands for the “introduction of something new” and additionally for the “renewal of what already exists”. Innovation can refer to products and services (product or service innovation; generally also supply innovation), as well as to processes, e.g. in the production or marketing area (process innovation). If new business models are developed or existing business models are further developed, these are business model innovations. Inter-media selection Inter-media selection is concerned with the question of which media should be used as part of a communication campaign. Here, for example, it is decided whether advertising should be placed on TV, on the radio, in print media or online. Internal Branding  Internal Branding is a holistic management approach that aims to ensure that the employees and managers of a company not only behave in a highly customer and sales-oriented manner, but also in a manner that conforms to the brand. Internal marketing  In internal marketing, the instruments of marketing (especially communication), which are classically oriented towards external target groups, are oriented towards the internal area of the company and thus towards the company’s own managers and employees. Interview  An interview is an oral or telephonic questioning of a subject. A subject is an experimental or test person. Intra-advertising selection per advertising medium Intra-advertising selection per advertising medium includes the selection of the advertising medium to be used within the framework of media planning after the decision for an advertising medium. When deciding on online as the medium, for example, the question arises as to whether advertising banners, keyword ads or social media ads should be used. Intra-media selection  Intra-media selection involves the selection of media within the framework of media planning that are to be integrated within an advertising medium group. When using TV advertising, the question then arises as to whether a TV spot should be placed on ARD, ZDF, RTL or VOX. Joint venture  A joint venture (in the sense of “joint risk”) is a joint venture that is newly established by at least two companies in order to jointly achieve certain objectives. Key account management (also key customer management)  Key account management is a form of a company’s sales organization that is based on the value of its customers. In this case, a company’s own sales employees (known as key account managers) or groups of sales employees are assigned to major customers. Keyword ads (also known as sponsor links)  Keyword ads are placements on search engine results pages that are usually awarded via bidding procedures. These search results are marked as ads there. Lead user concept  In the lead user concept, important customers are integrated into the entrepreneurial innovation process at a very early stage. Lead users  Lead users are trend-leading users or customers who are ahead of the mainstream as trendsetters and can have a lasting influence on the mass market with their requirements, expectations and/or ideas. They can be characterized as customers with

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needs regarding products and services that will only become relevant for the mass market later on. In addition, lead users can also be characterized by the fact that they communicate perceived needs  – also to relevant suppliers  – and sometimes already have ideas for solving problems. Lead users often belong to the group of innovators or creative people who find solutions for existing tasks themselves if the market does not yet provide such solutions. Lean start-up method  In the lean start-up method, a business model or a product or service is developed very close to the market by continuously obtaining feedback from potential customers already in the course of the development process. This results in a build-measure-learn cycle that is run through repeatedly (iteration) in order to develop innovations step by step (incremental approach) and to quickly achieve convincing performance. List brokers  List brokers are companies that provide addresses to advertising companies without the companies referred to as list brokers themselves being the owners of the addresses. They therefore act as brokers for addresses. Load test  Compare load test Low-interest product Low-interest products are products which, due to their nature, their environment of use or consumption, their short period of use and/or their low price, are of little interest to the buyer or user. Macro-environment  The macro-environment describes the company’s wider environment, which it must take into account when structuring its activities. This includes in particular the socio-cultural, technological, economic and political-­legal environment. These can result in requirements for the company. At the same time, the company’s activities have an impact on these areas. Mail order  Buying and selling by mail order is done “at a distance”. There is no face-toface encounter between seller and buyer. If the order is placed on online platforms, this is e-commerce. If, on the other hand, an order is placed offline (e.g. by order card or telephone), this is known as traditional mail order. Mailing (also direct mail, advertising letter, white mail)  A mailing is a paper-based, addressed advertising approach to target persons on a postal basis, which can be designed as an individual or mass approach. Manufacturer’s brandCf  . branded article Market life cycle  The market life cycle describes the development of demand for a specific market segment (e.g. tablet PCs, tumble dryers) over several product and/or technology generations. As with the product life cycle in the narrower sense, a distinction is made between the phases of introduction, growth, maturity and saturation. Market potential  The market potential describes the potential absorption capacity of a market for a good and thus indicates the maximum possible sales volume or the maximum achievable turnover and represents a forecast value. Market segmentation  Market segmentation attempts to divide a market into more homogeneous submarkets that lend themselves to market cultivation by accessing certain characteristics. The characteristics used for segmentation are called segmentation cri-

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teria. Examples are age, gender, purchasing power of consumers. For companies, the industry, the legal form and the number of employees can be used for segmentation. Market segmentation, microgeographical Microgeographical market segmentation analyses the purchasing and information behaviour of consumers on a small-scale basis. To this end, a large amount of information relevant to purchasing behaviour is compiled from various sources about consumers. The households grouped together in a geographically defined cell are regarded as homogeneous and are given a “stamp” in the sense of being assigned to a certain pattern of characteristics and behaviour. Market share  The market share is the ratio of the turnover (or sales) achieved by a company in the period under review to the total turnover (or sales) achieved by all companies operating in the same period. These total sales are called market volume. The market share is expressed as a percentage. Market share, relative  The relative market share is the ratio between the turnover (and sometimes sales) achieved by a company in the period under review in relation to the turnover (and sometimes sales) achieved by the largest competitor in the same period under review. The relative market share does not have a value designation. Market test  A market test is a trial sale of a new product or the trial use of a modified marketing diamond in a regionally defined market with the aim of determining the effects on the information and purchasing behaviour of the target persons in the run-up to a launch on the market as a whole. Market test, regional  As part of a regional market test, a product is introduced temporarily in a geographically limited submarket. A prerequisite for the transferability of the results obtained in this way to the market as a whole is the representativeness of the submarket for the market as a whole. Market tests can be used to determine not only the reactions of buyers, but also the acceptance in the trade and possible reactions of competitors. Market utilisation rate  The market utilisation rate is calculated by dividing the market volume by the market potential. The market exploitation rate is expressed as a percentage. The market exploitation rate is a measure of the market growth that can still be achieved in a market in the future. Market volume  The market volume refers to the turnover or sales already realised for a corresponding good or to a turnover or sales forecast for the near future. Market  A market is a (mental) summary of all business relationships between current and potential suppliers and customers for a certain good or a certain range of goods at a certain time and in relation to a certain space. The market can be as concrete as a weekly market. However, a market can also be as abstract as the global labour market or the global energy and capital market. Marketing analysis (also marketing research)  Marketing analysis includes all activities used in the course of planning, organizing, implementing and controlling marketing activities in order to record and evaluate the requirements from the micro and macro environment as well as the effects of one’s own marketing on these areas.

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Marketing audit  Marketing audit (“audit”) involves a critical reflection on individual or all marketing activities of a company. The marketing audit can be strategically or operationally oriented. Marketing Automation  Marketing Automation refers to the independent triggering of recurring marketing activities. The goal of marketing automation is to increase the efficiency of marketing processes and the effectiveness of marketing activities. In essence, this usually involves communication triggers that are triggered by the system (i.e. without further human intervention) due to the presence of certain triggers. Marketing controlling  Marketing controlling includes all activities that are used to monitor and control the entire marketing management process. Marketing controlling should continuously, systematically and critically analyze the totality of marketing activities and contribute to the identification and exploitation of success potentials. Marketing diamond  The marketing diamond is formed by the instruments of product and program policy, price and conditions policy, distribution policy, communication policy and personnel policy. The marketing diamond represents a further development of the classic marketing mix, which includes product and program policy, price and conditions policy, distribution policy and communication policy. Marketing execution  Marketing execution is the concrete use of marketing strategies and marketing instruments in the sense of implementation to achieve marketing goals. Marketing execution describes the implementation of measures. Marketing instruments The marketing instruments include the product and program policy, the price and conditions policy, the distribution policy and the communication policy. In more recent works, these four marketing instruments have been supplemented by personnel policy. There is also talk of the “4 Ps” (Product, Price, Promotion, Place) or the “5 Ps” (Product, Price, Promotion, Place, People). Marketing management  Marketing management comprises the process of marketing research in order to define the marketing objectives, the marketing strategies, the marketing measures and the process for implementation in a planning process. The implementation process is carried out by the marketing organization and monitored with regard to the achievement of the defined objectives by marketing controlling. Marketing mix  The specific design of a company’s marketing instruments together form the company’s marketing mix. Marketing objective  A marketing objective is a desired target state of a company. This target state is to be achieved through the use of marketing strategies and the use of specific marketing instruments. This marketing execution is ideally flanked by marketing controlling and supported by the marketing organization. Marketing organization  The marketing organization contains the formal specifications of the marketing area. This includes the organizational structure (e.g. the organizational chart of the marketing area) as well as the process organization (e.g. the process of communication planning or for the development of new products). Marketing planning  Marketing planning is the link between information and action in the marketing field. It is based on a comprehensive marketing analysis of one’s own

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company as well as the micro and macro environment. The core of marketing planning is the definition of marketing objectives and the determination of the appropriate marketing strategies to achieve them, as well as the description of how the marketing diamond is to be shaped. In the course of marketing planning, it is also necessary to determine the marketing execution relevant to the achievement of objectives as well as the flanking systems of marketing controlling and marketing organization. Marketing ResearchCf  . Marketing Analysis Marketing strategy  Marketing strategies are fundamental decisions of a company that have a long-term effect and are aimed at achieving the overall marketing objectives. Marketing  Marketing characterizes the concept of market-oriented corporate management and comprises the planning, organization, implementation and control of all market-oriented activities. On the one hand, marketing represents the management’s guiding principle for corporate management. On the other hand, marketing also denotes a function that describes the areas of responsibility of a company in addition to procurement, production, human resources and controlling. Media planning  Media planning comprises the temporal and instrumental allocation of the communication budget to the available advertising media and means of advertising. The objective is to achieve an optimal distribution of the communication budget with regard to the intended communication goals. Micro-environment  The micro-environment defines the immediate sphere of action of a company and includes not only customers and suppliers but also competitors and investors. Mobile marketing  Mobile marketing is the planning, organization, implementation and control of marketing measures that a company carries out by establishing contact via mobile devices. If information or services are targeted directly at the location of the target person, this is referred to as location-based services. Monitoring  Monitoring uses data analysis to find answers to the question: What is currently happening? Monitoring stands for the direct, systematic observation, recording and thus monitoring of processes and developments in order to intervene immediately in ongoing processes on the basis of the knowledge gained. More Sell  More Sell aims to motivate an already acquired customer to repeatedly purchase the same products or services from the same company. In this way, the company aims to increase sales per customer – even for the same products. Multi-channel sales In multi-channel sales, different sales channels (e.g. online and offline sales) are used in parallel in order to reach as many target groups as possible. The channels used here are largely unconnected to each other. Multivariate methods  Multivariate methods analyse more than two variables simultaneously in statistical calculations (e.g. age, gender and income). Need  Requirement is an “object-oriented intention to act”. The satisfaction of a need, which is initially aimed at in general terms, is directed towards a very specific object through the concretisation of a need. Thus, the need “hunger” becomes a demand that can be directed either towards a chocolate bar such as Mars or Twix, but also towards a

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carrot or a banana. This need only becomes effective as a demand when the individual wants to purchase the corresponding product and has the necessary purchasing power to do so. Need  The need corresponds to a “state of tension with drive character” in the inner system of a person and represents an initial factor for purchase processes, among other things. This need, for example hunger or thirst, “cries out for satisfaction”. Initially, the need is still undirected and is only concretized as a need to be satisfied. Neuro-marketing  Neuro-marketing refers on the one hand to the analysis of information intake and processing as well as decision-making processes in the human brain. This is the information-gathering aspect of neuro-marketing. On the other hand, neuro-marketing also refers to the design of marketing instruments when the findings of neuro-marketing research are incorporated. This is the information-­using aspect of neuro-marketing. New customer acquisition New customer acquisition refers to the planning, organization, implementation and control of all measures that a company uses to motivate people or companies to enter into a buying relationship with its own company for the first time. No-name product (also generic brand)  No-name products are consumer goods, some of which have deliberately simple packaging, are located in the lowest price segment and do not have a product-specific brand name. The product is simply called “flour”, “paper handkerchiefs”, etc. Generic brands combine different products from the entire range of a retailer. Non-profit marketing  Non-profit marketing refers to the use of marketing instruments in companies or other institutions that do not pursue a profit-making objective. Here, the marketing instruments are intended to contribute to achieving, for example, social goals (“wearing a seat belt in the car”, donations to Amnesty International), environmental goals (“using water sparingly”), faith-related goals, educational goals or political goals (for example in party advertising during election campaigns). Non-stationary and semi-stationary trade Non-stationary and semi-stationary trade includes, for example, weekly markets, sales vehicles (e.g. for the supply of bread rolls and fish in the countryside), coffee sales trips and sales and order fairs. Objectivity  Objectivity refers – for example in research projects – to the absence of subjective influences. If objectivity is given, then the same results are achieved regardless of which researcher was involved. Objectivity refers to the conduct of data collection, the analysis of the data and the interpretation of the results. The objectivity of the researcher and the research approach is a necessary condition for obtaining trustworthy and therefore “robust” information. Observation  In observation, subjects and/or objects are perceived in a way that is oriented towards a research question and thus purposeful. These can be, for example, persons, companies or processes.

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Omni-channel sales  Omni-channel sales strives to provide “seamless” customer care via various operating channels in order to serve the customer in the best possible way. Here, the activities on the various channels are coordinated and interlinked with each other. One-to-Many  One-to-Many is a form of market communication in which a communicator (e.g. a company) sends out a message differentiated by market segment. The persons belonging to a segment are therefore addressed in the same way. However, there are differences between the addresses of different segments. One-to-Mass  One-to-Mass is a form of market communication in which a communicator (e.g. a company) sends a message to the general public in an undifferentiated manner. One-to-one marketing  One-to-one marketing describes a form of marketing (often primarily communication, in some cases also service provision) that is ideally oriented towards the specific needs of each individual customer and addresses them with individually prepared offers. One-to-One  One-to-One is a form of market communication in which a communicator (e.g. a company) directs a message in a personalised and, if necessary, individualised manner precisely at a target person. Online community (also Internet community, online community)  An online community is a virtual community of online users who express their togetherness through often intensive interaction with each other. In many cases, users can contribute their own texts, images or videos to the community. In addition, contributions from other members of the community can usually be used, commented on and/or modified. Online marketing  Online marketing comprises the planning, organisation, implementation and control of all market-oriented activities that make use of the Internet as well as stationary and/or mobile end devices with Internet access to achieve marketing objectives. Open Innovation Model  The Open Innovation Model takes up external suggestions and innovations in addition to the impulses for innovations gained internally. To this end, external development partners such as customers, but also suppliers, universities and research institutes, are proactively integrated into the company’s own innovation processes. This is intended to expand the company’s own innovation potential. Operational forms of retailing  The operational forms of retailing subsume the forms of wholesale and retail trade, which differ in terms of location, size, product range, service intensity, price level and target group, among other things. Organizational Citizenship Behavior The Organizational Citizenship Behavior describes individual and voluntary behaviors of companies that lie outside the traditional role expectations of companies. The behaviour displayed (e.g. assuming a particular social responsibility) is generally not directly or explicitly sanctioned by the formal remuneration systems of companies. Nevertheless, these behavioural patterns can help to improve the performance of organisations and increase their reputation among the general public, thereby contributing to the achievement of further corporate goals.

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Organizational structure  The object of the organizational structure is the creation of various organizational units, which are called divisions, departments or staff units. These organizational units are assigned areas of responsibility (e.g. for marketing, purchasing, sales, production, personnel, R&D) as well as the resources required to achieve the objectives (e.g. budget and employees). In addition, the organizational plan determines where in the organizational hierarchy the individual organizational units are to be placed. A visual representation of the enterprise structure, from which hierarchy levels are also recognizable, is called an organizational chart. Outbound telephone marketing (also active telephone marketing)  In outbound telephone marketing, a company actively uses the telephone to establish contact with target persons. The task can be performed by company employees and/or by corresponding service providers. Outside-in process  In the outside-in process, external knowledge is integrated into the company’s internal innovation process in order to accelerate and enrich it and – insofar as customers are involved – to align it consistently with (future) customer requirements. Packaging  Packaging is the outer wrapping of products. On the one hand, it serves to protect the products in the course of distribution and, on the other hand, its presentation is intended to encourage purchase and provide relevant information for the buyer. This information includes, for example, details of ingredients in the case of foodstuffs or details of use in the case of consumer goods. Panel  The panel is an instrument of market research in which an equal group of addressees is surveyed at regular intervals on identical topics. The panel can consist of consumers, households, specialists or companies (e.g. retailers). By r­ epeatedly questioning the same addressees, it is possible to identify changes in behaviour over time in an identical sample. If the panels are appropriately designed, the results can be representative of the population and thus extrapolated to it. Pay per Use/Pay as You Go  In this pricing strategy, the user pays only for the service provided instead of for the products themselves. Penetration pricing strategy (also penetration pricing)  The penetration pricing strategy is a competitive low-price strategy when introducing new products in order to gain a large number of customers for one’s own product as quickly as possible. Over time, the price is continuously increased. Percentage-of-sales method  The percentage-of-sales method is a procedure for determining the advertising budget, in which the budget amount is derived as a percentage value from the sales of the past or future year. Similarly, the expected profit or the profit generated in the past can also be the basis for assessment. Permission  A permission is a specific permission that a prospect or customer gives to a company regarding the “allowed” way to contact them (e.g. by email, phone, fax, push notifications). Permissions can also refer to camera access, microphone access, contact information, and more. Permissions can be revoked at any time by the prospect or customer. Companies are legally obligated to comply with these permissions to contact.

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Persona  A persona is a fictitious archetype that represents the target group and is intended to give it “a face”. A persona is described like real people – with name, profession, life story, current occupation. Often a photo is also assigned to the persona in order to get a “picture” of it in the truest sense of the word. Personal Selling (also known as personal selling)  In personal selling, direct contact takes place between the salesperson and the potential buyer in the course of acquiring customers. Planning  Planning is the link between information and action and is an information-­ gathering, information-processing, and will-forming process. Planning involves, among other things, decisions about which projects to undertake and which to discard. In each of these decisions, an attempt is made to “predict” the consequences of the decisions through impact or development forecasts. Therefore, planning is the making of decisions while simultaneously anticipating (in the sense of anticipating) the associated effects. Planning is a mental anticipation of future action. Point of Purchase (POP, also Point of Sale/POS)  Point of Purchase or Point of Sales refers to the place where the purchase or sale takes place. Purchases and sales can take place online or offline. Portfolio analysis  Portfolio analysis is a method of strategic analysis and planning in which the current market position of products, strategic business units, companies or countries as well as the further market prospects are examined and presented in order to make strategic deductions on this basis. Post-purchase dissonance (also “post-decisional regret”) Post-purchase dissonance describes a phenomenon that occurs after the initial purchase, especially among buyers of higher-priced goods or products that have a longer useful life. It is an uncertainty on the part of the buyer as to whether the right offer has actually been chosen. This phenomenon arises because the buyer has chosen one offer (with its weaknesses) and thus against a possible multitude of alternatives (with their specific strengths). It is a specific manifestation of cognitive dissonance. Pre-sales services  Pre-sales services refer to services provided by a company in the runup to a purchase act in order to prepare or initiate it. Pretest  A pretest is a market research instrument that is used to determine the effects of planned marketing measures in a test environment prior to their comprehensive implementation. Price differentiation  With price differentiation, different prices are charged for (almost) the same services, which are determined according to different criteria. Price leadership  The price leader is the company that initiates a round of price changes in an industry – either up or down. Price maintenance, vertical With vertical price maintenance, commercial buyers are obliged to adhere to certain prices vis-à-vis the final purchaser. Price  From the buyer’s perspective, price represents the amount to be paid when purchasing a product or service. From the supplier’s perspective, price represents the amount

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charged when selling a product or service in order to achieve specific business and/or marketing objectives. Price-sales function (PAF)  The price-sales function is the geometric representation of the relationship between different price levels and the associated sales quantities of the corresponding good. Pricing and conditions policy  Pricing and conditions policy includes the planning, organization, implementation and control of operational activities to determine and enforce prices and conditions for the marketing of the company’s range of services. This includes, in particular, dynamic and static pricing strategies, the granting of discounts and cash rebates, and the definition of terms of delivery and payment. Primary research (also field research)  Primary research involves the (possibly initial) acquisition of information about matters of interest. For this purpose, surveys, observations and/or experiments can be carried out, for example. Because one goes “into the field” to collect the desired information, one also speaks of field research. Process organization Process organization is the definition of processes that divide complex tasks into work steps in order to ensure better manageability. This includes, for example, the activities of marketing research, marketing controlling and marketing planning. Procurement marketing Procurement marketing is the entrepreneurial concept of achieving the most efficient and effective solutions possible for operational procurement processes through the use of marketing instruments. Product and program policy  Product and program policy encompasses the planning, organization, execution and control of operational measures for the development and implementation of a company’s range of services. This includes in particular the development, management and elimination of products and services, the design of packaging, branding and decisions regarding the design of the product range. Product differentiation (also line extension) Product differentiation occurs when a modified product version is added to the original product. Product differentiation expands the depth of the provider’s product range because an additional offer is made within a product line. This is why we also speak of line extension. The same applies to the marketing of services. Product elimination  Products are eliminated from the company’s product range because they no longer contribute to the achievement of company and/or marketing goals. The same applies to the marketing of services. Product life cycle in the broader sense  In the product life cycle in the broader sense, the central phases of introduction, growth, maturity and saturation of the product life cycle in the narrower sense are extended by the upstream creation phase and by the downstream disposal phase (applies analogously to services). Product life cycle in the narrower sense  The product life cycle in the narrower sense describes the development of demand for a specific product over several product versions (applies analogously to services). A distinction is made between the introduction, growth, maturity and saturation phases.

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Product placement  Product placement involves the integration (placement) of products, services or corresponding brands in non-advertising environments. This can be, for example, feature films, reports, shows and consumer programmes. Such integration can also take place in editorial articles of newspapers and magazines, without this being highlighted as advertising and/or being directly visible. The integration often takes place in return for financial or material contributions and must meet legal requirements. Product test  In the course of an experimental investigation, a product test involves having new or modified products evaluated by test persons (usually members of the target group) according to opinion and/or use or consumption. In order to carry out a product test, a completely finished offer or a corresponding prototype must be available. Product variation  In the case of a product variation, the original product retains its basic concept, but individual components are changed and/or modernized over time. In this case, the varied product replaces the predecessor offering. Consequently, neither the depth nor the breadth of the product range changes as a result of product variation. Product-market matrix (also Ansoff matrix)  The product-market matrix is an analysis grid for determining strategic directions for the expansion of a company. It can be used to obtain indications for market penetration, product and/or market development and diversification. Profile analysis  The core of profile analysis is the determination of structures (also called profiles) in one’s own customer or prospect base. This can reveal segments that should be processed in a differentiated manner (see Segmentation, Transaction-Oriented). Profile analysis is part of analytical CRM. Profit center  The profit center is an organizational service area within the company that is delimited according to certain criteria (e.g. products/services, customers, regions, functions), has an independent market task and a certain strategic decision-making scope, and bears full responsibility for profit and loss. Profit and loss responsibility means that the management of this unit is personally measured against the results of the corresponding area – with a direct influence on the performance-­related remuneration components. Prospect management  Prospect management is the planning, organization, implementation and control of all measures that are intended to develop a person or a company into a prospect for a company or a specific offer. This phase includes all measures taken by a company to acquire new customers. Prospect management describes a phase in the customer relationship life cycle. Public relations (PR, also public relations)  Public relations as an instrument of communication policy involves building positive relationships between the company and the general public. The target group goes beyond the actual and target customers as well as the interested parties and includes political decision-makers, the general public, the media, investors, shareholders, suppliers, competitors and also includes the company’s own as well as future employees. In accordance with the PR principle “Do good and talk about it”, the company strives to build up as positive an image of itself as possible in the public eye within the framework of PR campaigns.

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Pull communication  In online marketing, we speak of pull communication when a target person “pulls” the desired information from the Internet. This is achieved, for example, through the use of search engines, the use of content marketing, clicking on keyword ads and the targeted visit of provider or price comparison sites. Involvement in blogs and online communities can also be understood as the targeted acquisition of information by interested persons and thus as an expression of this pull communication. Pull strategy (also jump advertising)  In the pull strategy, the end customer (consumer or company) is wooed by the manufacturer himself so that he approaches the trade and virtually “pulls” the products and services out of the sales channel (“pull” corresponds to “pulling”). Since the trade is skipped here, the strategy is also called jump advertising in the case of an advertising objective. Purchase act  The purchase act is the completed purchase. Purchase decision, extensive  In an extensive purchase decision, an intensive preoccupation and a comprehensive weighing of possible advantages and disadvantages of the available offers take place before a purchase decision is made. Purchase decision, habitual  In the habitual purchase decision, the decision-making process is extremely abbreviated on the basis of previous experience and is carried out more or less habitually, without questioning the advantages and disadvantages of a purchase again. Purchase decision, impulsive (also impulse purchase)  In the case of an impulsive purchase decision, a decision is made spontaneously and thus unplanned. In this case, there has been no prior discussion of the purchase. Purchasing power  Purchasing power is the amount of money available to a consumer or group of consumers for purchases. Push communication Push communication includes online activities by companies that actively deliver information to users. These include, for example, SMS messages, e-mails and e-newsletters as well as banner advertising, which may be targeted specifically at Internet users. This is why we also speak of push messages or push notifications. Push strategy  The push strategy describes the approach of a manufacturer who tries to push his products into the sales channel (“push” corresponds to “pressing”). This is done under the premise that retailers will actively engage in selling the products once they have them in their assortment. QR code  The “QR” in the QR code stands for “Quick Response”. By scanning and thus reading a QR code, the user can access further information via the Internet. This can be specific offers, further news or a corporate website in general. Rack jobber (also shelf wholesaler)  A rack jobber is a wholesaler who offers his goods in other retail establishments on sales areas rented there – usually with his own shelves. Rating and review management Rating and review management aims to acquire as many high-quality and positive social signals from customers as possible. This includes comments, shares, likes and ratings that can be made on various platforms. This is intended to increase the various conversions that a company is aiming for – from web-

Glossary

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site visits to content downloads, gaining an email permission to store visits (online and offline) and app downloads. Reach  Reach is the number or proportion of people who come into contact with one or more advertising media. Quantitative (global) reach refers to the number of people addressed, regardless of whether they belong to the respective target group. Qualitative (target group-specific) reach involves determining the number of target persons reached. Reactance  Reactance occurs when an individual feels exposed to an unwanted influence and withdraws from the expected behavior through a defiant reaction. Reactance is the opposite of acceptance. Realtime Advertising (also Programmatic Advertising or Programmatic Ad Buying)  In realtime advertising, online advertising space is auctioned off in real time. Realtime advertising describes the process of automated and data-supported media planning in order to acquire advertising inventory in real time based on auctions and to automatically target predefined groups. Rebate  Rebate is a price reduction for goods and/or services granted on a list price (sometimes also called bonus). The recipients of rebates can be the end customers (“consumer rebate”) or sales partners. A distinction is made between functional discount (also dealer discount) for sales partners and quantity discount, time discount and loyalty discount. Relationship marketingCf  . customer relationship management Relaunch  The relaunch (in the sense of a new start) is a process that a company carries out in the saturation and decline phase of the product life cycle in order to breathe “new life” into existing products. A relaunch can have a communicative focus, a product facelift in the sense of a further development of the “product surface” in the form of the design and/or involve radical product changes. Services can also be relaunched. Reliability  Reliability describes the “reliability” or “accuracy” of a study. The question here is whether the same results would be obtained under the same conditions if the data were collected again. Representativeness  Representativeness is given when the findings obtained on a sample basis can be extrapolated to a population. The prerequisite for this is that the structure of the sample as a subset reflects the population well, i.e. represents it.Response is the reaction triggered by a communicative address in the sense of a response from the person addressed. This can be a query, a request for information, an app download, an order or a purchase. Response Analysis  A response analysis is the evaluation of data from responders to one or more marketing promotions. The data can describe responses to a promotion, coupon redemption, orders, inquiries, or purchases. Through a response analysis, the structure of the responders and their exact behavior are analyzed in order to optimize follow-up actions. Response booster (also Early Bird)  A response booster is an advantage offered to motivate the recipient of a message to respond (quickly). This is intended to increase the response rate. A response booster can be a time-limited discount or a gift that is promised to the responder if he responds quickly.

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Response element (also response element)  A response element offers the recipient of a message the opportunity to react. Response elements are, for example, an online or offline coupon, a reply card, an order form or a QR code. Response Management  Response management includes all the measures that are used to record and process the response from marketing activities. Response rate (also response rate or conversion rate)  The response rate represents in percentages how many responses were recorded, for example, in relation to the advertising media used. The response rate is a central key figure in marketing. Retail panel  A retail panel provides information on sales in the various forms of distribution. For this purpose, the same facts are collected from the same sales intermediaries at regular intervals. This form of longitudinal analysis allows changes over time to be identified. Retail, stationary  Stationary retail has fixed locations (shops) that a potential buyer must visit in order to make purchases. These include department stores, petrol stations and hypermarkets. Retailing  Retailing describes the task of procuring goods and reselling them to end consumers. This function is performed by certain companies. These include, for example, department stores, discount stores, specialist stores and boutiques, which are referred to as retail companies. Sales aids  Sales aids are legally and economically independent bodies that support the distribution process in various ways without themselves acquiring ownership of the goods. These include, for example, logistics companies or commercial agents, commission agents and brokers. Sales force  Sales force refers to those persons who are predominantly engaged in the initiation and processing of orders and the support of interested parties and customers outside the company’s registered office. This includes, in particular, travelers and sales representatives as well as the sales staff of the offering company. Sales intermediaries  Sales intermediaries are legally and economically independent entities that purchase products and services in their own name and for their own account for resale. These include, above all, retailers and wholesalers. Sales letter  Compare mailing Sales promotion Sales promotion is an instrument of communication policy and is intended to stimulate sales in the short term and directly. The duration of sales promotion measures is therefore limited and can range from a few days to a few months. The target group of the sales promotion can be the sales force (sales force promotion), the trade partner (dealer promotion) and/or the end customer (consumer promotion). Sales services  Sales services refer to services provided by a company during a purchase act to support it. Sales, direct  In direct sales, the goods produced by the producer are sold directly to final consumers without the intervention of the trade.

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Sample  A sample is a subset of the population relevant to the study for which certain findings are to be obtained. If the sample is chosen to be representative of the population, the results of the sample can be extrapolated to the population. Scatter losses  Scatter losses represent non-targeted contacts of a communicative address. Through communication, people or companies are repeatedly reached with an advertising medium (a TV spot, an ad, an insert, a mailing, an e-mail, a post, an online banner) even though they do not belong to the target group. These contacts represent scatter losses and are the result of an imprecise targeting of communication measures. However, scatter losses can usually not be completely avoided even by sophisticated optimization measures. Scoring model (also utility value analysis, point evaluation method) The scoring model enables the evaluation of different objects on the basis of empirical values and is intended to contribute to the objectification of decisions. The evaluation is carried out on the basis of differently weighted criteria by assigning points (scores) per criterion. It offers systematic and comprehensible support in complex decision-making situations. Scoring models are used, for example, in the selection of new product ideas, in the selection of sales partners and employees, and in the evaluation of investment locations. Creditworthiness information is also based on scoring models. Screening  Screening is a pre-selection when different options (e.g. new product ideas) are to be checked for their basic suitability. Here, a selection is often made on the basis of so-called “must” criteria, which the alternatives must absolutely fulfill. Search engine advertising (SEA for Search Engine Advertising; also keyword advertising)  In search engine advertising, companies place advertising banners for suitable search queries in the environment of the organic hit list of the search engines. These are also called keyword ads. Search Engine Optimization (SEO)  Through search engine optimization, companies try to achieve good rankings in the organic hit lists of search engine providers by specifically designing their Internet presence. Secondary research (also desk research)  Secondary research involves obtaining information about matters of interest by accessing existing findings and/or studies. For example, online research and a review of the studies of relevant market research companies can be carried out. Because this type of research can be conducted from a desk, it is also referred to as desk research. Segmentation, acquisition-oriented The acquisition-oriented segmentation defines which persons or companies or groups a company wants to acquire as customers. This is about the “definition of the prey grid”. Segmentation, transaction-oriented  Transaction-oriented segmentation is used for the prospects and customers of a company that have already been acquired, insofar as data is available about them. In order to achieve more individualized support, the data obtained in the course of transactions between prospects or customers on the one hand and the company on the other is evaluated.

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Glossary

Seller’s market  In a seller’s market, the “seller” in the sense of the company offering the product (be it the manufacturer itself or the dealer) holds the dominant market position due to excess demand. Service  Services are non-tangible goods, such as consulting with a company, using a hairdresser, going to a restaurant, developing an advertising campaign, or ­teaching students. Often, however, these services also include tangible services. These include the booklet or presentation at a consultation, the food served at a restaurant, the layouts of an advertising campaign, and lecture notes. Servitization  Servitization describes a development in which manufacturing companies shift their service portfolio away from physical products towards services and/or a combination of tangible goods and services. Share of Mind  Share of Mind measures the customer’s awareness and familiarity with a company’s offering compared to that of its competitors. Share of Wallet (also Share of Basket)  Share of Wallet is the share of a specific provider “in the shopping basket” in the sense of the sales made by a customer in a specific product category (e.g. drugstore articles or clothing). The share of wallet is determined for the respective product group of interest and thus represents the market share of a provider in the sales of this product group for the analyzed person. Shopping center  A shopping center is a shopping center planned as a complete facility that spatially combines various retail formats and service providers. Shopping Good  Shopping goods are products (e.g. suits, shoes, furniture) or services (e.g. financial investments, holidays) that are bought less frequently and often in the higher price segment, and for which the customer is prepared to invest time and energy in shopping. He compares different offers, visits different shopping locations and is open to information and advice, as his preference system is not yet fixed. Skimming price strategy (also skimming pricing)  In the skimming price strategy, products or services are initially introduced to the market at a high price. “To skim the cream from the milk” literally means “to skim the milk”. Only over time are prices reduced. In this way, customers’ willingness to pay is gradually skimmed off. Skimming PricingCf  . skimming pricing strategy Skin resistance measurement (also electrodermal reaction/EDR or psychogalvanic reaction/PGR)  In skin resistance measurement, the activation of the body is determined. The basis for this is the increasing sweat secretion with increasing activation, which can be determined as increased conductivity of the skin for electricity. Sleeper rate  The sleeper rate indicates the percentage of issued customer cards that are not used or not used with the necessary frequency. The sleeper rate can also be determined for apps that are downloaded but not used. Social media (also social media)  The term social media subsumes online media that enable Internet users to exchange information online, which goes far beyond classic e-mail communication. In addition to social networks and media sharing platforms, social media also include blogs, online forums and online communities.

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Social media marketing  Social media marketing comprises the planning, organization, implementation and control of measures in which a company uses social media to achieve marketing goals. Specialised trade  Specialised trade is a type of retail business that specialises in certain sectors. These are, for example, sports, clothing, shoes or car accessories). Here, a deep assortment is usually offered with the provision of services (especially advice and service) in the medium to higher price range. Specialist discounter  The specialist discounter is a form of retail operation that concentrates on a sector-specific, narrow product range and often does not offer any branded articles. The lowest price level is aimed for through a simple to most basic presentation of goods and self-service. Specialist store  The specialist store is a form of retail operation that is positioned between the specialist trade and the consumer market. Specialty stores specializing in certain product groups are characterized by larger sales areas and a narrow but often deep range of products. Specialty Good  Specialty goods are products that are bought less frequently and often in the higher price segment (e.g. suits, shoes, furniture) or services (e.g. financial investments, holiday trips) for which the customer is prepared to invest time and energy in shopping. Here the customer’s preference system – in contrast to the Shopping Goods – is already developed. In the case of specialty goods, the customer is looking for a very specific brand or a very specific supplier. Sponsoring  Sponsoring comprises the planning, organization, implementation and control of measures in which the supporting company (sponsor) provides a recipient (sponsor) with cash, non-cash contributions and/or services. In return, the recipient undertakes to draw attention to the sponsor’s support through various communication measures. Sponsorship is based on the principle of reciprocity. Storytelling  With storytelling, values and information are conveyed through a story. The prescriptive (i.e. prescribing) function of such a story has a norm-setting effect and thus defines what the relevant values of the company and brand are. The descriptive (i.e. descriptive) function additionally provides an idea of the form in which values can be lived out in concrete terms and thus facilitates their implementation in one’s own actions. Strategic business unit (SBU, also strategic business field/SGF)  A strategic business unit defines a section of the corporate area of activity. When forming strategic business units, an attempt is made to find product-market combinations which are as homogeneous as possible and which comprise an independent, customer-­related market task. For the strategic business units, independent strategies can be developed to build up or exploit potential for success. Strategy  A strategy describes the long-term market behavior of a company with which the company wants to achieve its goals. Strategies are characterized by their longterm orientation, often based on a time horizon of three years or more. Strategies are often developed for the entire company or complete strategic ­business fields (SGFs) or

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strategic business units (SBUs). Strategy work involves the development of concepts for the long-term creation, safeguarding and exploitation of success potential. At the same time, strategies define the framework conditions for operational planning. Finally, operational planning should define the successive implementation of the strategies. Strengths and weaknesses analysis  The strengths and weaknesses analysis is a method of company analysis with which a company wants to determine its positioning in the relevant competitive environment. Strengths and weaknesses are always to be shown in relation to the relevant competitors. Supermarket  The supermarket is a type of retail outlet that usually has a sales area of 400 to approx. 800 sqm and stocks a wide range of foodstuffs with approx. 12,000 to 25,000 articles, which is often rounded off by non-food offers. With an open presentation of goods and dominant self-service, medium to partially low price ranges can be found. Survey  Survey (also opinion poll or interview) is a research method in which – usually oriented to a questionnaire or a question guideline – a conversation is conducted with the aim of systematically gaining information about the attitudes, opinions, behaviour, knowledge, motives and/or intentions of people. SWOT analysis (also TOWS analysis)  The SWOT analysis analyzes the company’s own performance in light of the relevant competitors while simultaneously evaluating future market conditions. “SW” stands for Strengths and Weaknesses in the sense of comparative advantages or disadvantages of the company and covers the internal perspective of the analysis. “OT” stands for Opportunities and Threats and integrates the external perspective into the analysis. Through the subsequent synthesis of external and internal perspectives, strategic conclusions can be drawn for the further development of the company. Symbolic Management  In symbolic management, central corporate and brand values are communicated to the relevant target groups inside and outside the company via symbols or symbol-like actions (e.g. by the company management or individual employees). Synergy (also 2 + 2 = 5 effect)  Synergy is spoken of when “the whole is more than the sum of its parts”. Through the planned interaction of at least two forces, more can be achieved in the presence of synergy effects than the sum of the isolated use of the two forces alone. The forces effective here can be companies, departments, employees, technologies, information, etc. Tachistoscope  The tachistoscope is a device by which, for example, images of products to be evaluated can only be shown for a short time (between 1/1000 second and 3 seconds). This makes it possible to identify initial expectations regarding the product shown in terms of the corresponding product category and positioning. The perception of individual elements is determined and the appealing character of a product is recorded in the pre-rational space, i.e. before a rational evaluation of the contents could take place. Target costing (also known as target pricing)  Target costing is a procedure in which a company’s cost targets are derived from the prices achievable on the market in order to achieve customer-oriented pricing. The price of a product is not determined by an over-

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head calculation, but is calculated retrograde. This means that the “justifiable” costs are calculated backwards from the target price on the market. Target definition  To define a target precisely, the target content (What is to be achieved?), target extent (How much is to be achieved?), time horizon of a target (By when is it to be achieved?) and scope of a target (Where is it to be achieved?) must be fixed. Target group selection  The target group selection determines, for example, which prospect and/or customer groups are to be processed by instruments of the marketing diamond. The selection of the target groups as well as the design of the instruments is based on the company and marketing goals. Target system  A target system comprises several targets and can include different target relationships (target harmony, target competition and target indifference). Tele-shopping  Tele-shopping (derived from television) describes the marketing of products and services via television. Special TV formats are used for this purpose. In essence, it represents a mail order business with a “TV-supported, living catalogue”. To this end, various offers are regularly presented in ongoing TV programs, which are intended to encourage immediate ordering. Testimonial  A testimonial is a person known through sports, film/radio, music, politics, etc. who professes to use certain offers in advertising and encourages imitation. Testimonials can also be members of certain industries to whom special competence is attributed for certain offers (e.g. taxi drivers for cars or dentists for toothpaste). Touchpoints  Touchpoints refer to the points of contact of a (potential) customer with a product, a service, a brand or a company. Trade fair  A trade fair is a temporary event with a market character at which companies from individual sectors (special trade fair) or several sectors (universal trade fair) present their range of services. They take place at regular intervals at the same locations. A trade fair can be aimed at trade visitors and/or the general public. Trade functions  Trade functions are the tasks performed by the institutions of trade in the context of acquisitive and/or physical distribution. Trademark  Trademarks are signs with which a commercial enterprise provides goods in order to differentiate them in the competitive environment. The owner of the trademark rights is the trading company. Trading-up  Trading-up refers to a process in the course of which trading companies improve their range of services step by step. Traveler  A traveler is an employee of a company who is responsible for customer acquisition and customer care in the field. Twitter  Twitter is an information service on the Internet. Registered users can enter their own text messages (maximum 280 characters) and forward them to others. This communication process is called tweeting (equivalent to “tweeting”). The posts are called tweets (equivalent to “peeps”), are presented as a chronological list, and can be subscribed to by interested individuals (referred to here as followers). These tweets can also be commented on and/or forwarded.

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Unique Advertising Proposition (UAP) With the Unique Advertising Proposition, a unique position of a brand, a product or a service is sought through advertising statements and claims which, in contrast to an “original” benefit element, cannot be redeemed and are often difficult to copy. “Unique” illustrates that the value proposition is viewed by the target person as either unique or at least superior to other alternatives. “Advertising Proposition” means that the value proposition is justified solely by advertising statements – and is not fulfilled by real content. Unique Passion Proposition (UPP)  The Unique Passion Proposition aims to achieve a unique position for a brand, product or service by making the passion of the people behind it visible and tangible. “Unique” illustrates that the value proposition is seen by the target person as either unique or at least superior to other alternatives. “Passion Proposition” means that the value proposition for the target person is based on the passion of the people behind a service offering. This passion is experienced by customers during interactions with that company. Unique Selling Proposition (USP)  With the Unique Selling Proposition, a unique position of a brand, a product or a service is sought through objectively verifiable value propositions. “Unique” illustrates that the value proposition is viewed by the target as either unique or at least superior to other alternatives. “Selling Proposition” means that the objective value propositions have purchase decision relevance to the target person. In the case of the Unique Selling Proposition, there are objectively existing characteristics that only one company fulfils. These could be, for example, the lowest energy consumption, the longest shelf life, the highest vitamin content, etc. Univariate method  In a univariate method, only one variable is analysed in a statistical calculation (e.g. only age or only gender). Up-sell  Up-sell aims to motivate an already acquired customer to purchase higher-­value products or services from the same company. In this way, the company aims to achieve a higher added value from a purchase. Validity  Validity expresses in the sense of “validity” whether in the course of a study what was specified to be measured was actually measured. Value chain analysis  The value chain analysis analyzes the process of internal value creation in the own company and at competitors. On the one hand, the causes of competitive advantages are to be determined. On the other hand, potentials for achieving competitive advantages for the own company are to be identified. Viral marketing (also viral marketing)  Viral marketing uses the networking between people – especially through the Internet – so that information spreads epidemically and thus like a virus. Web 2.0  Web 2.0 is a form of the Internet that enables users to become active participants. Here, every user can become an editor of content by independently creating, maintaining and disseminating substance (texts, photos, videos, music, etc.) on the Internet. The consumer thus becomes a prosumer – a mixture of producer and consumer.

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Web monitoring  Web monitoring comprises a systematic evaluation of the contributions of Internet users that they have published generally on the Internet, but especially in social media (especially social networks). Through this, a company can receive feedback regarding its own performance or even impulses for innovation management. WeblogCf  . blog Wholesale  Wholesale describes the task of procuring goods and reselling them to processors (e.g. industry, trade), bulk consumers (e.g. hotels, restaurants) and/or resellers (retail companies). These functions are performed by companies that are referred to as wholesale companies (e.g. pharmaceutical or book wholesalers). Win-back management (also churn management)  Win-back management is the planning, organization, implementation and control of all measures to win back a person or company as a customer for a provider. Churn management also describes a phase in the customer relationship lifecycle.