Dacko S.G. The Advanced Dictionary of Marketing Putting Theory to Use
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product portfolio analysis 420
KEY INSIGHTS
A product portfolio analysis examines the firm’s portfolio of prod-
uct offerings to understand what, if anything, the firm should do to
strengthen its portfolio. For example, many firms try to create and main-
tain a balanced portfolio in terms of their perceived product life-cycle
stages, thereby working toward establishing a portfolio where, while
some products are being developed, the firm’s existing products are
spread across the introduction, growth, maturity, and/or decline stages.
Another strategically important way of assessing the strength of the
overall product portfolio, as well as the relative strengths and weaknesses
of individual offerings within the portfolio, involves the use of market
attractiveness and business position criteria to assess where the firm’s
offerings are in relation to one or more measures of market attractiveness
and one or more measures of the firm’s standing among competitors.
A notable framework for product portfolio analyses (and, more broadly,
for the analyses of the firm’s strategic business units or divisions) is the
growth-share matrix (also called the Boston Consulting Group matrix, the Boston
matrix, and the BCG growth-share matrix) more specifically, which relies
upon dimensions of market growth rate and relative market share to
determine to what extent each of the firm’s offerings is a star, cash cow,
question mark, or dog. Adopting the terminology of the BCG growth-
share matrix approach, an offering is a star when it has a high relative
market share and the market growth rate is also high; an offering is a
cash cow when it has a high relative market share and the market growth
rate is low; an offering is a question mark (or problem child) when it has a low
relative market share and the market growth rate is high; and an offering
is a dog when it has a low relative market share and the market growth
rate is low. Despite the framework’s widespread recognition, however, a
key issue to be addressed in its use is where the lines should be drawn
along each dimension (a decision that some argue is rather arbritrary)
to distinguish between market growth rates that are high vs. low and
relative market shares that are high vs. low. Depending on where the line
is drawn for market growth rate, for example, an offering may be a star
or it may be a cash cow. An alternative to describing and evaluating the
firm’s offerings in terms of such categories is therefore an analysis that
relies upon the major dimensions to assess the relative standings of the
firm’s offerings in relation to other offerings of the firm as well as those
of competitors in the marketplace but avoids the step of partitioning or
categorization.
KEY WORDS Balanced offerings
IMPLICATIONS
Astute marketers involved in strategy development recognize the
ongoing need to analyze systematically the firm’s portfolio offerings to
identify relative strengths and weaknesses as well as opportunities or
problems. A greater understanding of the many different approaches
to product portfolio analysis put forth in the marketing literature can
421 promotion budget setting methods
therefore provide the marketer with an opportunity to engage in such
analyses with increased rigor and potentially greater effectiveness. For
example, many different techniques have been developed for portfolio
analyses involving products of different characteristics and where many
of these techniques have been incorporated into commercially available
decision support software packages.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Anderson, Paul F. (1982). ‘Marketing, Strategic Planning and the Theory of the
Firm,’ Journal of Marketing, 46, Spring, 15–26.
Marketing Management
Dickson, Peter R. (1983). ‘Distributor Portfolio Analysis and the Channel Depen-
dence Matrix: New Techniques for Understanding and Managing the Channel,’
Journal of Marketing, 47, Summer, 35–55.
Palia, A. P. (1991). ‘Strategic Market Planning with the COMPETE Product Portfolio
Analysis Package: A Marketing Decision Support System,’ Developments in Business
Simulations and Experiential Learning, 18, 80–83.
Business-to-Business Marketing
Fiocca, R. (1982). ‘Account Portfolio Analysis for Strategy Development,’ Industrial
Marketing Management, 11, 53–62.
BIBLIOGRAPHY
Day, George S. (1977). ‘Diagnosing the Product Portfolio,’ Journal of Marketing, 41(2),
April, 29–38.
product specification see industrial buyer behavior
production concept see marketing management orientation
profit-per-customer effect see loyalty effect
promotion budget setting methods
DESCRIPTION
Approaches for establishing the amount of a firm’s expenditure on marketing
activities aimed at communicating the merits of the firm’s offerings and
persuading target customers to purchase or use the firm’s offerings.
KEY INSIGHTS
Firms can determine the amount to be allocated to its promotional activ-
ities using any number of methods. Recognized methods for promotion
budget setting include: the affordable method, which is where the firm sets
a budget based on what the firm’s management believes the firm can bear
without serious detriment; the competitive-parity method, which is where
the firm’s budget matches the promotional spending of competing firms;
the objective-and-task method, which is where the firm defines its promotion
objectives, identifies tasks required for their accomplishment, estimates
the costs associated with the tasks, and then sums all such costs; and
the percentage-of-sales method, which is where the firm bases the budget
amount on a specified percentage of current or expected firm sales or
unit selling price.
prospect theory 422
KEY WORDS Marketing expenditures, budget setting
IMPLICATIONS
Marketers involved in setting promotion budgets have a range of meth-
ods from which to consider. While the nature of the firm’s marketing
objectives is often key in determining which approach or approaches
may be beneficial to adopt, a greater understanding of the advantages
and disadvantages associated with each, along with an appreciation of the
many different pitfalls in planning and implementation more generally
(e.g. stubbornly adhering to a budgeting setting method in the face of
strategically important changes in the marketplace) may do much to
assist the marketer with making more effective promotion budget deci-
sions.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Hutt, M. D., Reingen, P., and Ronchetto, J. R., Jr. (1988). ‘Tracing Emergent Processes
in Marketing Strategy Formation,’ Journal of Marketing,52, January, 4–19.
Marketing Management
Piercy, Nigel F. (1987). ‘The Marketing Budgeting Process: Marketing Management
Implications,’ Journal of Marketing, 51(4), October, 45–59.
Piercy, Nigel F. (1986). Marketing Budgeting. London: Croom Helm.
Little, John D. C. (1966). ‘A Model of Adaptive Control of Promotional Spending,’
Operations Research, 14(6), November–December, 1075–1097.
Gupta, Sunil (1988). ‘Impact of Sales Promotions on When, What, and How Much
to Buy,’ Journal of Marketing Research, 25(4), November, 342–355.
Business-to-Business Marketing
Blasko, Vincent J., and Patti, Charles H. (1984). ‘The Advertising Budgeting Practices
of Industrial Marketers,’ Journal of Marketing, 48(4), Autumn, 104–110.
BIBLIOGRAPHY
Low, G. S., and Mohr, J. J. (1999). ‘Setting Advertising and Promotion Budgets in
Multi-Brand Companies,’ Journal of Advertising Research, 39(1), 67–80.
promotional pricing see pricing strategies
prospect theory
DESCRIPTION
A theory relating individual risk-aversion and risk-seeking tendencies to gain
andloss situations,whereitis theorizedandexperimentally demonstrated that
individualsaresignificantlymoreriskaversewhenfacinggainsandsignificantly
more risk seeking when facing losses.
KEY INSIGHTS
According to prospect theory as developed and researched by Kahneman
and Tversky (1979), individuals facing favorable conditions tend to be
more risk averse, as opposed to risk seeking, because they feel they have
more to lose than to gain. Conversely, individuals facing unfavorable
circumstances tend to be more risk seeking, as opposed to risk averse,
because they feel they have little to lose. The theory has received support
423 prospect theory
as a result of experiments conducted by the founders and subsequent aca-
demic researchers on individuals confronted with gain and loss situations
under a wide variety of controlled conditions.
KEY WORDS gains, losses, risk taking, risk seeking, risk, return, decision
making, framing
IMPLICATIONS
The theory has implications for explaining and predicting the tendencies
of people in evaluating information. Specifically, the theory provides an
explanation for why individuals and organizations may make decisions
that vary from what might be considered purely rational based on maxi-
mizing expected utilities.
In the context of organizational decision making, executives facing
external threats might be expected to be risk seeking, and executives
facing external opportunities might be expected to be risk averse
(Fiegenbaum and Thomas 1988; Wiseman and Gomez-Mejia 1998;
Chattopadhyay, Glick, and Huber 2001). Executives and managers should,
therefore, attempt to compensate for the possibility of inadvertent biases
in their decision making as a result of the way a decision is framed in
terms of gains and losses.
In the context of influencing consumer decision making, marketers
should consider the fact that consumers are likely to make product and
service purchase decisions based on personal valuations of gains and
losses that differ significantly from a purely rational perspective. Specif-
ically, whereas losing a dollar should be just as painful as the pleasure
of gaining a dollar, experiments based on prospect theory suggest that
losing a dollar is about twice as painful as the pleasure of gaining a dollar
(Kahneman and Tversky 1991). Thus, according to the theory, consumers
buying and holding financial market instruments will tend to hold on to
losing positions in the hope of a recovery while also tending to move too
quickly to sell to secure any financial gains.
Astute marketers of a wide range of products and services (e.g. financial
instruments, disability insurance, electric utility services, equipment war-
ranties) should therefore recognize consumer biases in psychologically
valuing gains and losses and make adjustments to their marketing strat-
egies and tactics in order to provide stronger psychological and actual
tangible appeals. In advertising and promotions, for example, marketers
may potentially increase consumer receptivity to a product or service by
emphasizing the risk of significant losses without the product or service
as opposed to the opportunity for significant gains with the same product
or service.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Qualls, William J., and Puto, Christopher P. (1989). ‘Organizational Climate and
Decision Framing: An Integrated Model,’ Journal of Marketing Research, 26(2), 179–
193.
psychic distance 424
Marketing Management
Shefrin, Hersh (1993). ‘Behavioral Aspects of the Design and Marketing of Financial
Products,’ Financial Management, 22(2), Summer, 123–131.
Chattopadhyay, Rithviraj, Glick, William H., and Huber, George P. (2001). ‘Organi-
zational Actions in Response to Threats and Opportunities,’ Academy of Manage-
ment Journal, 44(5), October, 937–955.
Fiegenbaum, A., and Thomas, H. (1988). ‘Attitudes toward Risk and the Risk-Return
Paradox: Prospect Theory Explanations,’ Academy of Management Journal, 31, 85–
106.
Mowen, John C., and Mowen, Maryanne M. (1991). ‘Time and Outcome Valuation:
Implications for Marketing Decision Making,’ Journal of Marketing, 55(4), October,
54–63.
Wiseman, R., and Gomez-Mejia, L. (1998). ‘A Behavioral Agency Model of Manager-
ial Risk Taking,’ Academy of Management Review, 23, 133–153.
Services Marketing
Smith, Amy K., Bolton, Ruth N., and Wagner, Janet (1999). ‘A Model of Customer
Satisfaction with Service Encounters Involving Failure and Recovery,’ Journal of
Marketing Research, 36(3), August, 356–372.
Advertising
West, Douglas (1997). ‘Antecedents of Risk-Taking Behavior by Advertisers: Empir-
ical Evidence and Management Implications,’ Journal of Advertising Research, 37(5),
September/October, 27–42.
Sales
Burton, S. (1989). ‘Decision-Framing Helps Make the Sale,’ Journal of Consumer Mar-
keting, 6(2), Spring, 15–24.
Marketing Modeling
Hardie, Bruce G. S. (1993). ‘Modeling Loss Aversion and Reference Dependence
Effects on Brand Choice,’ Marketing Science, 12(4), Fall, 378–395.
BIBLIOGRAPHY
Chattopadhyay, Rithviraj, Glick, William H., and Huber, George P. (2001). ‘Organi-
zational Actions in Response to Threats and Opportunities,’ Academy of Manage-
ment Journal, 44(5), October, 937–955.
Fiegenbaum, A., and Thomas, H. (1988). ‘Attitudes toward Risk and the Risk-Return
Paradox: Prospect Theory Explanations,’ Academy of Management Journal, 31, 85–
106.
Kahneman, Daniel, and Tversky, Amos (1979). ‘Prospect Theory: An Analysis of
Decision under Risk,’ Econometrica, 47, 263–292.
Kahneman, Daniel, and Tversky, Amos (1991). ‘Loss Aversion in Riskless Choice:
A Reference-Dependent Model,’ Quarterly Journal of Economics , 106(4), November,
1039–1063.
Wiseman, R., and Gomez-Mejia, L. (1998). ‘A Behavioral Agency Model of Manager-
ial Risk Taking,’ Academy of Management Review, 23, 133–153.
prospecting see selling process
psychic distance
DESCRIPTION
In the internationalization of a business, the perceived and understood degree
of closeness between a home market and a foreign market in terms of cultural
and business differences.
425 psychic distance
KEY INSIGHTS
In terms of a business contemplating internationalization, psychic dis-
tance is considered to be an important factor in determining its sequence
of foreign market entry, where psychically close foreign markets tend to
be entered before psychically distance foreign markets. According to this
view, closeness in psychic distance reduces uncertainties associated with
foreign markets and makes it easier for a firm to learn from its gradual
experiences in foreign markets as well. While research tends to support
such a view, it may also be the case, however, that firm choices of foreign
markets based on psychic distance criteria, which include both perceived
cultural closeness and business closeness (e.g. closeness in business prac-
tices, industry structure, and economic legal and political climate) may
not necessarily result in desired high levels of performance if such firms
paradoxically underestimate cultural and business differences and fail to
adapt sufficiently (O’Grady and Lane 1996).
KEY WORDS Internationalization, foreign market entry, culture
IMPLICATIONS
Marketing managers in firms contemplating internationalization, as well
as those seeking to understand and explain or predict the internation-
alization of other firms, may benefit from understanding better the
pivotal role of psychic distance in firms’ decision-making processes for
internationalization. Closeness in terms of psychic distance between a
firm’s home market and a foreign market may make learning about the
foreign market much easier, yet management must also exercise caution
in adopting standardized marketing practices across markets.
APPLICATION AREAS AND FURTHER READINGS
International Marketing
Evans, J., Treadgold, A., and Mavondo, F. T. (2000). ‘Psychic Distance and the
Performance of International Retailers: A Suggested Theoretical Framework,’
International Marketing Review, 17(4/5), 373–391.
Evans, J., and Mavondo, F. T. (2000). ‘Psychic Distance and Organizational Perfor-
mance: An Empirical Examination of International Retailing Operations,’ Journal
of International Business Studies, 33(3), 515–532.
Stoettinger, B., and Schlegelmilch, B. B. (1998). ‘Explaining Export Development
through Psychic Distance: Enlightening or Elusive?’ International Marketing Review,
15(5), 357–372.
BIBLIOGRAPHY
Johanson, J., and Vahlne, J.-E. (1977). ‘The Internationalization Process of the Firm:
A Model of Knowledge Development and Increasing Foreign Commitments,’
Journal of International Business Studies, 8(1), 23–32.
Kogut, B., and Singh, H. (1988). ‘The Effect of National Culture on Choice of Entry
Mode,’ Journal of International Business Studies, 19(3), 411–432.
O’Grady, S., and Lane, H. W. (1996). ‘The Psychic Distance Paradox,’ Journal of
International Business Studies, 27(2), 309–334.
psychoanalytic theory 426
psychoanalytic theory
DESCRIPTION
A view of individual drives and motivations that emphasizes the role of the
unconscious, or beyond awareness, and heavily influenced by emotion.
KEY INSIGHTS
Psychoanalytic theory, as developed by Freud (1955) as a psychological
theory, ascribes a significant role to the unconscious in establishing
individual drives and motivations. As such, certain motivational influ-
ences are viewed as being beyond awareness and may be in the form of
unconscious desires, instinctual urges, and conflicts. While not initially
developed as a personality theory per se, its basis and development
nevertheless provide a coherent approach for explaining better individual
characteristics or actions that are difficult to understand.
KEY WORDS Individual motivation, personality, unconscious drives
IMPLICATIONS
Marketers seeking to understand and explain consumer personalities
and/or complex, difficult-to-understand behaviors may potentially obtain
key insights through the lens of psychoanalytic theory and its associated
concepts. Understanding better the early experiences of individuals, for
example, may be one way to achieve insight into certain complex con-
sumer behaviors.
APPLICATION AREAS AND FURTHER READINGS
Consumer Behavior
Kassarjian, Harold H. (1971). ‘Personality and Consumer Behavior: A Review,’ Jour-
nal of Marketing Research, 8(4), November, 409–418.
Hirschman, Elizabeth C., and Holbrook, Morris B. (1982). ‘Hedonic Consumption:
Emerging Concepts, Methods and Propositions,’ Journal of Marketing , 46(3), Sum-
mer, 92–101.
BIBLIOGRAPHY
Freud, Sigmund (1955). ‘The “Uncanny”,’ The Standard Edition of the Complete Psy-
chological Works of Sigmund Freud, vol. xvii (1917–1919). London: Hogarth Press,
219–256.
psychographic segmentation see segmentation
psychological pricing see pricing strategies
public good see goods
public sector marketing see government marketing
pull marketing
DESCRIPTION
A strategic approach where a firm emphasizes marketing activities aimed at
building up consumer demand, thereby prompting consumers to demand the
offerings from intermediaries (e.g. retailers who, in turn, demand the offerings
from wholesalers) who, in turn, demand the offerings from the firm.
427 pull marketing
KEY INSIGHTS
Pull marketing emphasizes a demand pull (or pull strategy) approach to
marketing, which is where marketing activities such as advertising and
consumer promotion are directed strategically at consumers as a way to
encourage them to buy the firm’s offerings, thereby prompting demand
for the firm’s offerings from channel intermediaries such as retailers
and wholesalers—a demand which is then ultimately met by the firm.
Pull marketing is in contrast to push marketing which is where the
firm’s marketing is directed at intermediaries who, in turn, promote
the offerings to consumers. (See push marketing.) While pull marketing
strategies may be used by any firm that relies upon intermediaries, such
strategies are common in consumer marketing, where advertising and
sales promotions are dominant as a result of such goods typically being
inexpensive or low risk and where there are often many buyers and
sellers in the marketplace. Ultimately, however, many large companies
use both pull marketing and push marketing approaches.
KEY WORDS Consumer demand, demand creation, advertising, sales pro-
motion
IMPLICATIONS
Marketers in any firm should seek to understand how and to what extent
pull marketing may be used to the firm’s strategic advantage given
the characteristics of the firm’s offerings and the firm’s customers. In
many consumer product markets in particular, pull marketing becomes a
prominent strategic approach, but one that is also supplemented by push
marketing. When a consumer products firm engages in push marketing,
however, the astute marketer in such a firm will recognize that it may
also involve certain marketing disadvantages, including diminishing the
firm’s efforts to build long-term brand equity that result from more
intensive pull marketing efforts.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Farhoomand, A. F., and Drury, D. H. (1999). ‘Information Technology Push/Pull
Reactions,’ Journal of Systems and Software, 47, 3–10.
Morris-Lee, J. (1993). ‘Push-Pull Marketing with Magalogs,’ Direct Marketing, 56(2),
June, 23–26.
Liu, H. W., and Huan, H. C. (2005). ‘Tradeoff between Push and Pull Strategy: The
Moderating Role of Brand Awareness,’ Developments in Marketing Science, 28, 260–
265.
Marketing Management
Hultink, E. J., and Schoormans, Jan P. L. (1995). ‘How to Launch a High-Tech Product
Successfully: An Analysis of Marketing Managers’ Strategy Choices,’ Journal of
High Technology Management Research, 6, 229–242.
Online Marketing
Sands, M. (2003). ‘Integrating the Web and E-Mail into a Push-Pull Strategy,’ Quali-
tative Market Research, 6(1), 27–37.
push marketing 428
Government Marketing
Piper, W. S., and Naghshpour, S. (1996). ‘Government Technology Transfer: The
Effective Use of Both Push and Pull Marketing Strategies,’ International Journal of
Technology Management, 12(1), 85–94.
BIBLIOGRAPHY
Seddon, John (2000). ‘From “push” to “pull”: Changing the Paradigm for Customer
Relationship Management,’ Journal of Interactive Marketing, 2(1), July, 19–28.
Varadarajan, P. R. (1985). ‘A Two-Factor Classification of Competitive Strategy Vari-
ables,’ Strategic Management Journal, 6, 357–375.
purchase see buyer influence/readiness; buyer decision process
pure competition see competition
pure monopoly see competition
push marketing
DESCRIPTION
A strategic approach where the firm’s marketing is directed at intermediaries
who, in turn, promote the firm’s offering to consumers.
KEY INSIGHTS
Push marketing emphasizes a supply push (or push strategy) approach to
marketing, which is where marketing activities such as personal selling
and trade promotion are directed strategically at intermediaries as a way
to encourage them to buy the firm’s offerings and subsequently promote
them to consumers via advertising, sales promotion, and other means.
Push marketing is in contrast to pull marketing, which is where the
firm’s marketing activities are directed at consumers, thereby prompting
demand for the firm’s offerings from channel intermediaries such as
retailers and wholesalers—a demand which is then ultimately met by
the firm. (See pull marketing.) While push marketing strategies may
be used by any firm that relies upon intermediaries, such strategies are
common in business-to-business marketing involving industrial goods,
where personal selling practices dominate as a result of such goods being
expensive and/or risky and where there may also be relatively few buyers
and sellers. Ultimately, however, many large companies use both pull
marketing and push marketing approaches.
KEY WORDS Personal selling, trade promotion
IMPLICATIONS
As with pull marketing, marketers in any firm should seek to understand
how and to what extent push marketing may be used to the firm’s
strategic advantage given the characteristics of the firm’s offerings and
the firm’s customers. In many business-to-business markets in particular,
push marketing becomes a prominent strategic approach, but one that
is also supplemented by pull marketing. In some cases, push marketing
may be relatively more effective than pull marketing for stimulating
429 Pygmalion effect
short-term sales, but the astute marketer will recognize the need to
consider the long-term implications of either approach as well.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Levy, M., Webster, J., and Kerin, R. (1983). ‘Formulating Push Marketing Strategies:
A Method and Application,’ Journal of Marketing, 1083, Winter, 25–34.
Levy, M., and Jones, G. W. (1984). ‘The Effect on Sales of Changes in a “Push”
Marketing Strategy in a Marketing Channel Context,’ Journal of the Academy of
Marketing Science, 12(1), 85–105.
Business-to-Business Marketing
Masuchun, W., Davis, S., and Patterson, J. W. (2004). ‘Comparison of Push and
Pull Control Strategies for Supply Network Management in a Make-to-Stock
Environment,’ International Journal of Production Research, 42(20), 4401–4420.
BIBLIOGRAPHY
Achenbaum, A., and Mitchel, F. K. (1987). ‘Pulling away from Push Marketing,’
Harvard Business Review, May–June, 38–40.
Pygmalion effect
(also called the Rosenthal effect)
DESCRIPTION
The phenomenon where an individual’s performance and achievements are
enhanced as a result of whatis expected of them, independent of their abilities.
KEY INSIGHTS
Based on pioneering research by Rosenthal and Jacobson (1968) on the
Pygmalion effect in the classroom, where enhanced teacher expectations
for students led the students to achieve higher levels of intellectual
development independent of their actual ability, the Pygmalion effect
demonstrates the power of expectations and beliefs in shaping outcomes
as a result of their subtle influences on behaviors that help lead to those
outcomes. In this context, the Pygmalion effect can be viewed as similar
to that of a self-fulfilling prophecy. While the extent of the effect is
observed to vary based on context, subsequent research has confirmed
the presence of the Pygmalion effect in settings including the classroom,
industry, and the military.
KEY WORDS Expectations, beliefs, performance, outcomes
IMPLICATIONS
As the Pygmalion effect has been observed in many diverse set-
tings, astute marketing managers, too, will recognize the potential for
enhanced expectations of others leading to others’ enhanced perfor-
mance. Whether in sales or new product development, marketers may
therefore seek to leverage the power of expectations, in conjunction with
other facilitating actions, in shaping desired outcomes.