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Effective Marketing Decision-Making Process: A Comprehensive Framework

This guide outlines a structured decision-making process in marketing that encompasses problem definition, enumeration of decision factors, analysis of relevant information, identification of the best alternative, and implementation planning. Drawing from John Dewey's insights, the framework emphasizes critical steps that lead to effective decision-making. It encourages evaluating the decision and the entire process to ensure appropriateness and comprehensiveness. The document serves as a valuable resource for marketers seeking to make informed, strategic decisions in complex environments.

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Effective Marketing Decision-Making Process: A Comprehensive Framework

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  1. 3 CHAPTER Marketing Decision Making and Case Analysis

  2. DECISION-MAKING PROCESS: DECIDE Define the problem Enumerate the decision factors Consider the relevantinformation Identify the best alternative Develop a plan for implementingthe chosen alternative Evaluate the decision and the decision process

  3. STEP 1: DEFINE THE PROBLEM “A problem well defined is half solved.” — John Dewey Problem definition framework includes: Objectives Constraints Success Measures

  4. STEP 2: ENUMERATE THE DECISION FACTORS Two decision factors to be enumerated and related to each other: AlternativeCourses of Action Uncertainties Controllable by the decision maker such as the marketing mix. Uncontrollable factors that the manager cannot influence.

  5. STEP 3: CONSIDER RELEVANT INFORMATION Relevant information consists of information that relates to the alternatives identified by the manager as being likely to affect future events. Includes characteristics of the following: Industry Organization (competitive strengths and position) Consumers Alternatives Competitors

  6. STEP 3: CONSIDER RELEVANT INFORMATION • Identifying relevant information is difficult: • There is often an overabundance of information and viewpoints • Determining what does and does not matter is a skill learned through experience • Resist the temptation to consider everything as factual information • Sometimes relevant information must be created • A manager has performed a situation analysis when steps 1 through 3 are completed.

  7. STEP 4: IDENTIFY THE BEST ALTERNATIVE • The framework for identifying the best alternative is decision analysis, which: • Matches each alternative with the uncertainties in the environment • Assigns a quantitative value to the outcome associated with each match • Use a decision tree and a payoff table to show the relationship among alternatives, uncertainties, and potential outcomes.

  8. STEP 4: IDENTIFY THE BEST ALTERNATIVE A payoff table: • Displays the alternatives, uncertainties, and outcomes facing a firm. • Includes management’s determination of the probability of an uncertainty’s occurrence.

  9. EXHIBIT 3.2: PAYOFF TABLE FOREL NACHO FOODS Uncertainties CompetitorsMaintain Price(Probability = 0.9) CompetitorsReduce Price(Probability = 0.1) $150,000 $110,000 Reduce price Alternatives $175,000 $90,000 Maintain price

  10. STEP 4: IDENTIFY THE BEST ALTERNATIVE • A payoff table computes the “expected monetary value” (EMV) for each alternative. • The EMV is calculated as follows: ( Outcome of Uncertainty1 Probability (p)of Uncertainty1 ) EMV = × + ( Outcome ofUncertainty2 Probability (p)of Uncertainty2 ) × + … • EMVPI = EMV of Perfect Information

  11. EXHIBIT 3.3: DECISION ANALYSIS AND THE VALUE OF INFORMATION Payoff Table Uncertainties CompetitorsMaintain Price(Probability = 0.9) CompetitorsReduce Price(Probability = 0.1) EMVCalculation $150,000 $110,000 $146,000 A1: Reduce price Alternatives $175,000 $90,000 $166,500 A2: Maintain price EMVA1 = (0.9 × $150,000) + (0.1 × $110,000) = $146,000 EMVA2 = (0.9 × $175,000) + (0.1 × $90,000) = $166,500 EMVCertainty = (0.9 × $175,000) + (0.1 × $110,000) = $168,500 EMVPI = EMVCertainty – EMVBest alternative EMVPI = $168,500 – $166,500) = $2,000

  12. STEP 4: IDENTIFY THE BEST ALTERNATIVE Decision analysis is important because it: • Is a fundamental tool for considering “what if” situations. • Forces the manager to quantify outcomes associated with specific actions. • Is useful in a variety of settings. • Can be used in determining the value of“perfect” information.

  13. STEP 5: DEVELOP A PLAN FOR IMPLEMENTING THE CHOSEN ALTERNATIVE Developing an implementation plan involves: • Allocation of marketing, financial, and manufacturing resources. • Timing needed to develop a marketing plan. • Strategy formulation. • Strategy implementation.

  14. STEP 6: EVALUATE THE DECISION AND THE DECISION PROCESS With respect to the decision itself, ask two questions: • Was a decision made? • Was the decision appropriate given the situation?

  15. STEP 6: EVALUATE THE DECISION AND THE DECISION PROCESS With respect to the performance of the decision-making process, ask five questions: • Was the problem defined adequately? • Were all the pertinent alternatives and uncertainties identified? Were the assumptions realistic? • Was all the relevant information considered? • Was an appropriate course of action recommended?Was the logic consistent? Was any important piece of information overlooked? • How can the recommendation be implemented?

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