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MARKETINGTheory – Application - Implementation
Introduction to the course
MARKETING 3350
• TESTS 100%– 5 total – best 4 test scores will determine your
grade for the course.– No make-up tests! – No extra credit!
– Knowledge + logic + understanding = No guesses
COURSE STRUCTURE
• Business casual environment• Prepare for class everyday
– slides, text, websites, and vocabulary
• Attend all classes• Bring printout of slide and take good hand-
written class notes• Participate
– Your comments and questions, in-class activities
• Form opinions based on facts and analysis
Analyze, create, learn, understand, and apply [versus memorize]
Stages of learning1. Memorize – rote learning
2. Learn – understand in your own terms
3. Understand – be able to explain it to others so they comprehend
4. Apply – be able to identify, modify, and apply or creatively adapt for analysis and insight
KEY LEARNING OUTCOMES
Understand
• the role of marketing as the hub of the wheel,
• the importance of aligning corporate offerings with market wants and needs,
• the role of the chief marketing officer,
• the many functional areas of marketing, and introduce the major marketing concepts, models, and theories.
KEY LEARNING OUTCOMES
• Marketing has many components that need to be coordinated and integrated to maximize your chance for success.
• There is a logical sequence to developing marketing programs and the importance of research to making good decisions.
• There are many marketing concepts and theories that are relatively easy to understand but are difficult to implement.
• New product development [NPD] is critical to the continuing success of the firm and how marketing manages the NPD cycle.
KEY LEARNING OUTCOMES
• For career success, students must become very flexible [recognize an item or situation even if it has a different name] and adaptable [take a basic concept, model, or theory and modify or apply it to a specific situation] to succeed in the business world.
• Also for career success, students must become comfortable making decisions based on incomplete and sometimes uncertain information!
Harvard Business Review TOP TOOLSBLUNT
INSTRUMENTS
RUDIMENTARY IMPLEMENTS
POWER TOOLS
SPECIALTY TOOLS
Strategic planning *Customer segmentation *
Core competencies *
Growth strategy*
Scenario & contingency planning *Strategic alliances *Supply chain management*
Outsourcing
Collaborative innovation
Six sigma*
RFID*
Mergers & Acquisitions
Loyalty management
Knowledge management *
CRM *
HBR 2006 [12/07 P. 20]
Imagination is more important than knowledge.
-Albert Einstein
MARKETING
MARKETING
• Excellent marketing executives are dreamers that are also doers.
• They convert dreams and ideas into successful products and services.
MARKETING AND YOU
• You must continually market yourself to have the best career opportunities!
• Why do you think two graduating seniors with exactly the same GPA and extracurricular activities get very different offers?
ORGANIZATIONAL GROWTH AND NEEDS
• FUTURE MANAGEMENT CHALLENGES OF YOUR GENERATION
– Depth, breadth, and flexibility
– Leadership
ORGANIZATIONAL GROWTH AND NEEDS
• DEMOGRAPHIC DYNAMICS
– Managing multiple [older] generations– The changing landscape– Future labor force and employment
projections– An increasingly difficult challenge with
skilled labor• 2011-2020• 2021-2040
THE RECESSION and EMPLOYMENT
EFFECTIVE DATE RATE RATE WITH 25% BENEFITS
< July 24, 2007 $5.15 $6.44 [$13.4k]
July 24, 2007 $5.85 $7.31 [$15.2k]
July 24, 2008 $6.55 $8.19 [$17.0k]
July 24, 2009 $7.25 $9.06 [$18.9k]
40.7% increase
June 30, 2010 Illinois [3rd highest]
$8.25 $10.31 [$21.5k]
60.1% increase
What would you do with your number of employees if you owned a business?
LABOR FORCE PROJECTIONS
No matter which economic projections come true … there will be a sharp slowdown in the number of people entering the
workforce.
Business Week, May 20, 2002
[Where have all the workers gone? video]
What’s happening to jobs?
• Piece labor → assembly line → automated assembly line
• Better-faster-cheaper → outsourcing
• Integrated circuit → automation– Office functions– Internet replaces much information servicing– Machinery [precision and speed] + Robots [working, efficiency]– Scanners [bar codes → RFID]– Relational data base software [single data entry, data capture, routine analysis]– Automated warehouses [AGVs, AS/RS systems]
• Foreign displacement– Shrinking world [lesser developed nations wages for unskilled jobs which are
DISAPPEARING, speed to market and customer]– Trade area local content – NAFTA and EU!
FORCES AT WORK 1960 to now
• Influx of women into the labor force
• Reduction in the armed services
• Corporate downsizing
• Immigration is flat
• Technology advances accelerate
• Baby boomers start retiring in mass– What do you think about Social Security for you?
What’s happening to jobs?
• Piece labor → assembly line → automated assembly line
• Better-faster-cheaper → outsourcing
• Integrated circuit → automation– Office functions– Internet replaces much information servicing– Machinery [precision and speed] + Robots [working, efficiency]– Scanners [bar codes → RFID]– Relational data base software [single data entry, data capture, routine analysis]– Automated warehouses [AGVs, AS/RS systems]
• Foreign displacement– Shrinking world [lesser developed nations wages for unskilled jobs which are
DISAPPEARING, speed to market and customer]– Trade area local content – NAFTA and EU!
FORCES AT WORK 1960 to now
• Influx of women
• Reduction in armed services
• Corporate downsizing
• Immigration is flat
• Technology advances accelerate
• Baby boomers start retiring in mass– What do you think about Social Security for you?
Population by Single Year of Age and Sex: 1970
1.8 1.3 0.8 0.3 0.3 0.8 1.3 1.8
Under 1 year5 years
10 years15 years20 years25 years30 years35 years40 years45 years50 years55 years60 years65 years70 years75 years80 years
85+ years
AG
E
Percent
MaleFemale
• Source: U.S. Census Bureau, Decennial Census 1970
Working Age
20-65
Males Females
Population pyramid
Population by Single Year of Age and Sex: 2000
1.8 1.3 0.8 0.3 0.3 0.8 1.3 1.8
Under 1 year5 years
10 years15 years20 years25 years30 years35 years40 years45 years50 years55 years60 years65 years70 years75 years80 years
85+ years
AG
E
Percent
Male Female
• Source: U.S. Census Bureau, Decennial Census 2000
Working Age
20-65
Males Females
Population by Single Year of Age and Sex: 2030
1.8 1.3 0.8 0.3 0.3 0.8 1.3 1.8
Under 1 year5 years
10 years15 years20 years25 years30 years35 years40 years45 years50 years55 years60 years65 years70 years75 years80 years
85+ years
AG
E
Percent
Male Female
• Source: U.S. Census Bureau, Population Projections 2008
Working Age
20-65
Males Females
SOCIAL SECURITY [One scenario]
• Underfunded by $26,000,000,000,000 to 2040
– ~2,513,415,404 miles of $1 bills end-to-end– ~100,899 trips around the earth at the
equator
• But, if our economy grows 0.5% faster than the assumed growth rate, social security is not underfunded!
GENERATION Y
• You are different from all previous generations – and you will shape the world in unknown ways.
• GEN Y occupies a unique place in the history of the world.– Wealth– Education– Opportunity
• Never before has a single generation entered into a change of the labor force of this magnitude.
LABOR FORCE PROJECTION ISSUES
• WEALTH EFFECT
– 401k, pensions, and social security
• INHERITANCE EFFECT
– $8-22 TRILLION range– $197,000 per Baby-Boomer– What would your parents do differently if they
inherited $400,000 tax-free today?
• AGING
LEADERSHIP
• C-LEVEL & BOARD VISION
• EXECUTIVE GROUP STRATEGIES
• MANAGERS PROGRAMS
TACTICS
IMPLEMENTATION
VICE PRESIDENTSVP MARKETING (& SALES) 1-3 years
LEADERSHIP AND TIME HORIZONS
EXECUTIVEMANAGEMENT
BOARD OF DIRECTORS,CEO, COO, CMO, GROUP VP,… 1-10 years
EXECUTIVE, &SENIOR VICE PRESIDENTS 1-5 years
MIDDLEMANAGEMENT
DIRECTORS DIRECTOR – PRODUCT MANAGEMENT 1 year
SENIOR MANAGERSGROUP PRODUCT MANAGER 1 week-1 year
MIDDLE MANAGERSPRODUCT MANAGER 1 week-few months
LOWERMANAGEMENT
JUNIOR MANAGERS Immediate-30 days
ENTRY-LEVEL MANAGERS Immediate-30 daysSUPERVISION& WORKFORCE
SUPERVISORY PERSONNEL&
WORK FORCEImmediate
YOUR CAREER SUCCESS DEPENDS ON
• ON TIME
• UNDER BUDGET
• ABOVE PLAN
• NO EXCUSES
• EVERY TIME!
KEY MARKETING FUNCTIONS• Assist the CEO with the mission, vision, and overall
strategy of the firm.
• Assess and respond to the wants, needs, and satisfaction of various markets and market segments.
• Develop, design and manage new product development to enhance product / service portfolios.
• Develop and implement channel of distribution, positioning, and pricing policies.
• Communicate with various stakeholders.
• Increase net revenue and pre-tax profit and sometimes market share.
MARKETING IN ACTUAL PRACTICE REQUIRES
• Awareness of the world around you• Planning, strategy, implementation, and refinement• Understanding and analyzing data• Organization and focus of resources … resource
efficiency• Recognize changes, trends, forces, threats, and
opportunities then act on them.• Leaders vs. Followers video
TREE DIAGRAMHow does an aging population affect the economy of a
developed nation?
Developed Nations: Aging
populations
Labor Shortage
Rapid increase in number of
elderly
More Automation
Demands more workforce and management
skills
Increase in government payments
Increases social security, health care, long-term
care, …
Elderly want smaller houses
Small house building boom
Potentially too many large
homes
What will they do?
?
What will they buy?
MORETravel
Financial services
Smaller sizes/portions
Cosmetic surgery
…
Try one on your own for … How does an aging population affect the economy of an underdeveloped nation?
RECOGNIZING TRENDS: EXAMPLE
• The average Chinese person ate 44 lb. of meat in 1985 but more than 110 lb. in 2006.
– This increases the demand for grain as it takes <18 lb. to produce one lb. of beef. So the average Chinese person is responsible for the world needing to produce an additional 1,008 pounds of grain per year.
– Or it increases the demand for grain for grain as it takes <7 lb. [39% of what beef takes] to produce one lb. or pork.
MAJOR CHANGES / LESSONS1985 – TO DATE
THE GOOD• Price → Value [Wal-Mart]
• Speed to market is critical [INTEL]
THE BAD• Multi-nation markets, competitors, &
customers [GM continual reorganizations]
• Must have a clear vision [Sears]
• Products, capacity, and / or technology are not enough [Polaroid]
REVOLUTIONARY TRENDS
• Constantly accelerating rate of change• The emergence of the EU & trade areas• The Internet
– Information and the speed of access– Globalization– 1 : 1 marketing– Change the nature of work– Social Networking
• How much time do you spend per month on these?
"Business has only two basic functions –marketing and innovation."
-Peter Drucker
THEY ARE BOTH MARKETING FUNCTIONS!
MARKETING
MARKETINGTheory – Application - Implementation
1
THE HUB OF THE WHEEL
AND
CONNECTING WITH CUSTOMERS
MARKETING
• The role of the marketing organization is to efficiently discover and satisfy the needs and wants of markets and market segments.
• Markets and market segments are composed of customers, prospects, and suspects.
• The marketing organization should strive to exceed expectations on every purchase so that consumers want only that brand! That results in the lifetime value of a customer.
LIFETIME VALUE EXAMPLE
• How often do you purchase a box of Kleenex? 2/mo• Which translates to n boxes per year. • At what average unit selling price [AUP]? $1.50
• Which produces $ annual revenue [Ryr].
• Build the equation for annual revenue. • Times your remaining average lifespan [80-20] of x
years that amounts to $ lifetime revenue [Rl]!
• At 50% gross margin percent [GM]. Note GM=[P-C]/P
• Which results in $ gross profit [Plp] over your lifetime!
• Build the equation for life time value.– Answers: Net Revenue = $2,340 - Gross Margin = $1,170
AMA DEFINITION OF MARKETING
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
-American Marketing Association, 2007
Putting it simply, it is …
“Customer satisfaction at a profit”.Philip Kotler, Northwestern University
WHAT IS MARKETING?
• Marketing is the connector between the markets and the rest of the company.
• That is why we refer to it as the hub of the wheel.
• The marketing environment is composed of alliances, forces, relationships, and trends that can be controlled or influenced or used for the benefit of the firm.
THE MARKETING ENVIRONMENTUnderstanding Control and Influence
SeniorManagement &Organization Structure
Planning andSystems
Supply Chain
Management
MarketingMix
INTERNALFORCES
[controllable]
Social / CulturalAttitudes, Values, Lifestyle
Stakeholders
Environmental / Natural Forces
Government / Political / Legal /
RegulatoryExternal [environmental] forces are generally uncontrollable by the firm.
Human ResourcesTalent pool
TechnologyAdvancements, Trends
Capital / EconomicAvailability, Flows, Trends
CompetitionNature, Trends
MARKETING REQUIRES
1. Parties with unmet or unsatisfied needs and/or wants … whether or not the consumer can specify them.
2. The consumer has a desire [either a need or want] plus the ability to pay and be satisfied.
3. Effective 1 or 2-way communication
4. Something of real and/or perceived value
DISCOVERING NEEDS AND WANTS
• B2C consumers may not know or cannot exactly describe what they need or want.– The first iPhone.
• Most new products fail in their first two years based on initial net revenue and gross profit estimates.
• Marketing challenges– Be close to the market.– Focus on meaningful benefits.– Learn from the past, understand forces and trends of today
and tomorrow, then create the future.
NEEDS AND WANTS
• B2C: shaped by culture and personality
• B2B: [organizational buyers] shaped by requirements
Examples• B2C Personal vehicle – I need a car for transportation but
I want a new BMW.
• B2B Chocolate – I need some chocolate to make candy but I want a specific chocolate to make a Hershey Bar.
DISCOVERING AND UNDERSTANDING MARKETS
• MARKETS [for products and/or services] – [Preferably] uniquely defined groups of people or entities
with both the desire and the ability to benefit from a specific item.
• MARKET SEGMENTS– [Preferably] uniquely defined groups within markets.
• TARGET MARKET SEGMENTS– Those market segments the entity is and / or will actively
pursue.
• MARKET SHARE– The entity’s per cent of the total market in units or revenue.
MARKET SHAREGlobal Microprocessor Revenue Q1,2009 Source: iSuppli
INTEL 80.6% AMD 11.5% IBM 3.2%
Freescale 2.9% Others 1.8%
◦ Brand
◦ Product Family
◦ Product line
◦ Product item INTEL
Microprocessors
Celeron®
Product hierarchy
MARKETS AND STAKEHOLDERS• MARKETS [for
products / services]– Business [B2B]*– Consumer [B2C]*– Government– Reseller*– International*– Institutions [education and
health care]– Non-profit– Captive
• STAKEHOLDERS [some vested interest in what you do]– Customers [B2B &
B2C]– Prospects– Resellers– Employees– Internal departments /
individuals– Investors– and more!
Controllable Marketing Mix Factors
PRODUCT-PRODUCTS-SERVICES
-Product / Service Combos
PRICE-BENEFITS
-VALUE
PROMOTIONIntegrated Marketing
Communications
PLACE-WHERE
-EASE OF ACCESS
THE MARKETING MIX – The 4 P’s
4Ps originally suggested by E. Jerome McCarthy, Basic Marketing: A Managerial approach, Irwin, 1960. The chart of only the 4Ps is in almost every textbook.
THE MARKETING MIX - 4 P’s
PRODUCT PRICEPROMOTIONPLACE
Creates the ValueCommunicates
the valueProves the value
with benefits
In rank order, what are the three most important product benefits?
In rank order, where do consumers prefer to purchase the product?
What are the most effective ways for each market segment to recognize the benefits?
What are the most effective ways for consumers to recognize the value of the benefits?
Controllable Marketing Mix Factors:Asking the right questions
CUSTOMER VALUE AND RELATIONSHIPS
• VALUE – THE CORNERSTONE OF MARKETING
• The difference between expectation and usage value and the cost of procurement and use. What is value to you?
– Benefit[s]– Perception[s]
– Customer satisfaction [positive customer experience]
• No substitute for customer satisfaction– meet, exceed, or greatly exceed
– Managing customer expectations – especially with services
CUSTOMER VALUE AND RELATIONSHIPS
• Customer Value & Its Perception– How do you assess value? Clothing
• Value Strategies– are all about real and/or perceived
meaningful differentiation!
CUSTOMER VALUE AND RELATIONSHIPS
• Remember – there is only one best!
• Best? Price
• Best? Service
• Best? ProductBest perceived / proven value …
Best perceived solution …
for my situation.
CUSTOMER VALUE AND RELATIONSHIPS
• Relationship marketing– The friendship analogy– Easy to understand – hard to do.– Customer Relationship Management
systems [CRM]
MARKETING MANAGEMENT PHILOSOPHIES [and primary time periods]
• PRODUCTION ERA [< Great Depression]– Focused on the firm– Products that are available and highly
affordable
• PRODUCT ERA [~1900 to early 1960s]– Products with the most performance and
featuresThey will buy it if we build it.
• SALES ERA [~1920 to early 1960s]– Sales are driven by advertising & promotion
You will sell what we make.
Source: Much earlier than Principles of Marketing 14E – probably Kotler text without Armstrong
CONTRASTING CONCEPTS
FactoryExistingproducts
Selling andpromotion
Profits throughsales volume
Startingpoint Focus Means Ends
THE SALES CONCEPTInside-out
MarketIntegratedmarketing
Profits throughcustomer
satisfactionCustomer
needs
THE MARKETING CONCEPTOutside-in
Source: Principles of Marketing 14E, Kotler and Armstrong, Pearson, p.10 ISBN 13: 978-0-13-216712-3
THE MARKETING CONCEPT AT WORK
EVERYTHING BEGINS AND ENDS WITH THE CONSUMER !
EMPHASIZES MARKET [SEGMENT] AND CONSUMER NEEDS
MARKETSAND
SEGMENTSCONSUMER NEEDS
INTEGRATEDMARKETING
COMMUNICATIONS
PROFITSTHROUGH
SATISFACTION
VERSUS THE SELLING CONCEPT WHICH EMPHASIZES THE COMPANY
LEVERAGE BRAND EQUITY
The “Everything …” phrase dates to the 1970s. No idea where the boxes came from.
MARKETING MANAGEMENT PHILOSOPHIES
• MARKETING CONCEPT ERA [~mid 1950s to 1990s]– Market [customer]-driven approach
We will make it if we believe we can sell it in sufficient quantity AND GET AN ACCEPTABLE RETURN!
Therefore, marketing’s role is to determine if there is a sufficient probability of success to proceed.
• CUSTOMER RELATIONSHIP ERA [1980s to ?]– Mutually-satisfying long-term relationships
[relationship marketing]If we understand each other’s needs and wants we will
both benefit.
Much earlier than Principles of Marketing 14E – probably Kotler text without Armstrong
ETHICS & CORE VALUES
• MORALS The distinctions between right and wrong.
• ETHICS
The values of human conduct—the right and wrong of actions, and the good or bad of motives and ends.
ETHICS
• ETHICS– Personal ethics should exceed legal
requirements– If you have to ask about its legality, you
are likely in ethical trouble– Intent …– Corporate ethics … [Dilbert ethics video]
CORE VALUES
BENEFITS OF MARKETING
• Who benefits from marketing?– Everyone
• Who are the buyers and users?– B2B and B2C buyers and end-users
• How to consumers benefit?– Economic utility of form, place,
possession, and time
PLANNING
• STRATEGIC– Generally 3-10 years
• MARKETING– Generally one year or less
• TACTICAL– Generally days, weeks, or months
PLANNING AND THE FIRM
Corporate Philosophy
Strategy
Tactics
Vision - MissionCore values - Culture
Business definitions and missionsStrategic direction [leadership]
Infrastructure [core competencies]SBUs
Marketing planObjectives & Situation analysis
Segmentation and target marketingPositioningSales plan
Marketing mixProduct – Place – Promotion – Price [value]
No idea where the basic idea with the boxes originated but the text is highly modified.
STRATEGIC PLANNING• The long-term process of aligning the firm’s
capabilities to continually take advantage of market opportunities.
• The goal is usually – maximization of the entity’s revenues, profits, and
/ or– the accomplishment of major objectives.
• There are several excellent models. The challenge is to apply and adjust the most appropriate model for your situation.
STRATEGIC PLANNING
• What are we now?
• What capabilities do we want to develop?
• What businesses should we be in?
• How do we get there?– Conventional thinking [your education to date]
– Scenario Planning [Learning From the Future]
• What are the rewards of success?
MARKETINGTheory – Application - Implementation
2
STRATEGIC PLANNING,
CORPORATE GOALS, AND
CORE COMPETENCIES
ORGANIZATIONS
• Business entities
• For-profit organizations
• Associations
• Cooperatives
• Governments
• Non-profit organizations
BUSINESS STRATEGY
• The conglomerate lessons: You cannot be all things and conceptual synergies do not always occur.
• Marketing’s role in strategy– Work with CEO to understand long-term
objectives, then• Develop market and product development
programs, tactics, and then implement successfully.
HOW DOES MARKETING MEET CORPORATE GOALS?
• Increase net revenue and gross profit while controlling expenses.
• Improve and increase brand awareness and loyalty.
• Successfully develop and implement new products while extending market reach and increasing market share.
THE MARKETING ORGANIZATIONWORKING RELATIONSHIPS
President or General Manager or Managing Director [International]
BUSINESS UNIT MARKETING OFFICER
THE MARKETING PLAN
STRATEGIC DIRECTION OF THE FIRMBOARD / CEO / COO / CMO / GROUP VP
MARKET
RESEARCH
PRODUCT
MANAGEMENT
INTEGRATED
MARKETING
COMMUNICATIONS
SALES
ORGANIZATIONS
PRODUCTS & SERVICES
PRICING
CHANNEL MANAGEMENT
SALES FORCE DIRECTION
BRAND MANAGEMENT
CUSTOMER SURVEYS
NEEDS RESEARCH
ADVERTISING
PROMOTION
PUBLIC RELATIONS
SALES MATERIALS
SALES MANAGEMENT
DAILY SALES
ACCOUNT MANAGEMENT
CUSTOMER RELATIONSHIPS
TYPES OF SALES ORGS.
CUSTOMER
SERVICES
CUSTOMER CARE
INTERNAL EXTERNAL
COMMUNICATIONS CONTINUUM FOCUS
SALES
FORCES
Board of Directors and C-level executives
DESIGNING THE BUSINESS PORTFOLIO
• THE DREAM
• MISSION STATEMENT [purpose – guides decision-making]– See the U.S. State Department mission statement online
• VISION STATEMENT [values – beliefs and behavior → culture]
– Core values are the fundamental, passionate, and enduring principles that guide conduct over time.
– Values and beliefs: you can not live a dual life
– Peter Drucker: It's more important to do the right thing than to do things right.
DESIGNING THE BUSINESS PORTFOLIO
• Core competencies
• Considerations– Fit with other SBUs
– Synergies among the SBUs
– Competition between the SBUs
STRATEGIC DIRECTION OF THE FIRM
• CORE COMPETENCY TESTS
• Sustainable – Very long term [~10-20 years]AND
• Competitive – Obvious customer benefitsAND
• Advantage – Access to markets
• What core competencies would you need for
Source: C. K. Prahalad and Gary Hamel, “The Core Competence of the Corporation,” Harvard Business Review, May 1990.
General Electric Corporate
GE Commercial Finance(business loans, leases)
GE Healthcare(imaging, diagnostics, life-
support systems)
GE Industrial(appliances, lighting, factory automation)
GE Infrastructure(aircraft engines, energy,
transportation)
GE Money(consumer home loans,
credit cards)
GE NBC Universal(television, music, film)
SBU STRUCTURE – An example
THE STRATEGIC BUSINESS UNIT [SBU]
• A UNIT OF THE FIRM THAT HAS DIFFERENT OBJECTIVES, CAN BE PLANNED AS A SEPARATE UNIT, AND INTERNALLY COMPETES FOR
• PEOPLE – MONEY - DEVELOPMENT RESOURCES
OTHER SBU ISSUES– FAIR PERFORMANCE MEASURES– DEGREE OF AUTONOMY FOR EACH SBU
SBU
MARKETS /
SEGMENTS
TECHNOLOGIES /
PRODUCTS /
SERVICES APPLICATIONS
NEEDS
CORE VALUES
are the fundamental, passionate, and enduring principles that guide conduct over time.
– Values and beliefs: you can not live a dual life
– Peter DruckerIt's more important to do the right thing than to do things right.
Star Trek EnterpriseWhy is a mission statement important?
2-77
We are not in the coffee business serving people, but in the people business serving coffee.
-Howard Schultz, Founder and Chairman of Starbucks
STRATEGIC DIRECTIONA few beginning questions
• What do we do best?
• What should we do best?
• What business[es] are we in?
• What business[es] should we be in?
• …
“MARKETING MYOPIA” *
• Railroads [1800’s]
• Supermarket [1930]
• Color TV [Motorola, GTE, GE]
• Lead with price conundrum [Kressge & K-Mart, Xidex]
• You can always get sales!• Great marketing organizations rarely have financial
problems!
What is the myopia mistake in
Source: Theodore Levitt, “Marketing Myopia,” Harvard Business Review, July-August 1960, pp. 45-56.
MYOPIA MISTAKE: CHEESE FILTERED CIGARETTE
U.S. PATENT 3,234,948 [1966]
APPLYING THE MARKETING MYOPIA CONCEPT:
BUSINESS DEFINITIONS & EXTENSIONS
COMPANY
PRODUCT
ORIENTED
MARKET
ORIENTED
BUSINESS
EXTENSIONS
DISNEY Theme parks Fantasies & entertainment
What businesses are they in?
WAL-MART Discount stores
Value to middle class
What can they sell?
What can they not sell?
This slide is likely from an earlier Kotler text circa 2000-2010.
COMPETENCIES / KEY SUCCESS FACTORS
• NOT CORE COMPETENCIES• YOU MUST DO THEM BETTER EVERY DAY
• Customer services• Design• Engineering• ?
• What key success factors would you need to succeed with
KEY SUCCESS FACTORS FOR THE GARBAGE CAN CHAIR
US 4,387,927 June, 1983
What skills will we need to be really good at to succeed with this product that has no core competencies?
KEY SUCCESS FACTORS FOR THE GARBAGE CAN CHAIR
US 4,387,927 June, 1983
Always emphasize meaningful points of difference!
What are the meaningful points of difference?
BCG GROWTH-SHARE MATRIXBoston Consulting Group
Divest [or discontinue] – redeploy key
assets
Hold – But decide quickly then act
Build - invest heavily in tomorrow
Harvest for cash for reinvestment in the
firm
Source: Adapted fromThe Experience Curve Reviewed, IV. The Growth Share Matrix of the Product Portfolio, Boston, The Boston Consulting Group, 1973.
GE / McKinsey Matrix
• Market Attractiveness– Market size, growth rate,
potential– Competition– Profitability– Government regulation
• Business Strength
– Market share– Customer & market
knowledge– Cost efficiency– Technology
Originally developed in the 1970s by McKinsey for GE.
MA
RK
ET
AT
TR
AC
TIV
EN
ES
S
Lo
wM
ediu
mH
igh
SBU D
SBU C
SBU B
SBU A
Strong Medium Weak
BUSINESS STRENGTH
Invest & grow Selective growthHarvest: divest
/ dissolve
GE / MCKINSEY MATRIX
Originally developed in the 1970s by McKinsey for GE. This slide is likely from an earlier Kotler text circa 2000-2010.
HEDGEHOG ANALYSIS
• One clear simple statement about our passionate?
• What can we be the best excel at? – Beware of the “best” trap!
• What are we not the best at?
• What are our economic yardsticks?– For example profit per customer visit,
profit per employee, …
BLUE OCEAN ANALYSIS
• Red Oceans• The industries today – known markets and
competition• Increased competition decreases profits • The ocean turns red with blood [lack of
sufficient profits]
• Blue Oceans• Industries and / or markets that are not
known• Opportunity for rapid, very profitable growth• The great blue expanse of opportunity
• A Blue Ocean Strategy video.
SWOT ANALYSIS
• Complete a comprehensive unbiased situation analysis
• The SWOT Analysis– Identify all relevant trends– Analyze competitors and their trends– Understand your real competitive advantage[s]– Organization assessment [short and long term]– Research and understand the implications of
current and prospective markets, scenarios, and technologies
SWOT ANALYSISAnalyze your firm and your major competitors.
STRENGTHS
BUILD
Take advantage of the firm’s strengths
WEAKNESSES
CORRECT
Offset the firm’s weaknesses
OPPORTUNITIES
EXPLOIT
Use the firm’s strengths to offset competitive threats
THREATS
AVOID
Counter threats
LEVERAGE
PROBLEMS
CONSTRAINTS VULNERABILITIES
IP
Low cost structure
Market position
Breadth of offering
Lack of management
talent
Weak finances
NPD
New markets, channels
Acquisitions
Rapidly changing market
New entrants
Government regulations
INTERNAL EXTERNAL
This is the same concept but presented in a different way. The students seem to understand it better this way. Does it need to be cited or not? The original source is unknown.
COMPETITIVE ADVANTAGE
• The target market set[s] of real and perceived significant and meaningfully different features with their associated real and perceived benefits compared to competitive offerings.
PORTER’S THREE GENERIC STRATEGIES
DIFFERENTIATIONPerceived value
Caterpillar, IBM
OVERALL COST LEADERSHIPCommodities,Dell, Wal-Mart
NICHE / FOCUS
Understanding and focus
No direct battles with major competitors
INDUSTRY
WIDE
MARKET
SEGMENT
ONLY
Customer Perceived Uniqueness Low Cost Position
COMPETIVE
SCOPE
COMPETITIVE ADVANTAGE
MIDDLE OF THE ROAD [LOSING] STRATEGY – Chrysler, SearsMichael Porter, Harvard, Competitive Strategy, Free Press,1980 .
Every marketing program is different so the nature of any or all of the 4 P’s can vary from program to program.
Graphic is from MARKETING, Kerin, Hartley, Rudelius, 10E, McGraw-Hill Irwin, p. 42, 2011. ISBN 13: 978-0-07-352993-6
ASSEMBLING THE MARKETING MIX
MARKETINGTheory – Application - Implementation
3
SCANNING THE MARKET
ETHICS
• Tracking trends
• Understanding market forces, changes and trends– Competitive– Demographic– Economic
• consumer income, business income– Regulation and Enforcement– Social– Technological
UNDERSTANDING YOUR ENVIRONMENT
SOCIAL FORCES: DEMOGRAPHICS
• Demographics• World Population
7,217,647,800
+~7,000,000 per month• U.S. Population
320,158,475 4.4%
Source: Population numbers are from the U.S. Census Bureau WWW.CENSUS.GOV, 1/13/2015 10:57 am
CHANGE IN WORLD POPULATION
Source: United Nations Population Division, World Population Prospects, The 2008 Revision.
SOCIAL FORCES: DEMOGRAPHICS – B2C Generations and Households
• Baby Boomers: 1946 - 1964
• Generation X: 1965 - 1976
• Generation Y: 1977 - 1994
• Millennials: 1995 +
• Generational marketing
• Marital status and types of families
SOCIAL FORCES: DEMOGRAPHICSPopulation and its movement
DEMOGRAPHIC TRENDS: POPULATION
http://www.city-data.com/county/Lubbock_County-TX.html
DEMOGRAPHIC TRENDS: Rural and Urban
2009
DEMOGRAPHIC TRENDS: AGING
http://www.census.gov/ipc/www/idb/pyramids.html
SOCIAL FORCES: DIVERSITY
• 2010 Census– ~15% Hispanic ↑– ~12% African
American →– ~5% Asian
American ↑
• Multicultural marketing
SOCIAL FORCES: CULTURE
• What are some of the elements of culture?–
• The changing attitudes and roles of men and women
• What are some changing values?–
ECONOMIC FORCES
• The health of the economic and behavior– Inflation
• Results in
– Recession• Results in
• Monthly indicators• B2C University of Michigan Survey• B2B Purchasing Managers Survey
Gross Income is the total amount of money made in one year without
any deductions.
Disposable Income is the money a consumer has left after paying taxes.
Discretionary Income is the money that remains after paying for taxes and
typical expenses.
ECONOMIC FORCES: LEVELS OF CONSUMER INCOME
TECHNOLOGY FORCES: THE ELECTRONIC SOCIETY
• Marketplace
• Marketspace
• Electronic commerce– B2C
• Changing payment alternatives
– B2B
PORTER’S FIVE FORCES MODEL:Industry Analysis
What is the amount of rivalry among existing competitors?
What is the bargaining power
of your key customers?
What is the threat of
substitute products and/or
services?
What is the bargaining power
of your key suppliers?
What are the barriers to entry?
What is the threat of
significant new entrants?
See Michael E. Porter, Competitive Strategy, New York Free Press, 1980, for more information.
GOVERNMENT FORCES: FEDERAL LAWS AND REGULATION
• Regulation– Laws, regulations, filings, …
• Fair competition– Sherman Antitrust Act [1890]– Clayton Act [1914]– Robinson-Patman Act [1936] for resellers
GOVERNMENT FORCES: FEDERAL LAWS AND REGULATION
• Intellectual property protection– Copyright Law– Trademark Law– Patent Law– Trade Secret Law– Knowledge Management
GOVERNMENT FORCES: FEDERAL LAWS AND REGULATION
• Pricing
• Distribution– Exclusive– Exclusive territory– Requirement contracts– Tying arrangements / contracts
ETHICS – LAWS - GUIDELINES, REGULATIONS, AND COMPLIANCE
ETHICAL UNETHICAL
LEGAL AND COMPLIANT
WITH GUIDELINES
AND REGULATIONS
ILLEGAL
BUSINESS FORCES: ETHICS
• Business cultures around the world
• Transaction ethics – Caveat emptor– Caveat venditor– Federal Trade Commission
BUSINESS FORCES: ETHICS
• Competition around the world– Economic espionage– Bribes and kickbacks– Corruption Perceptions Index
• Transparency International
MARKETINGTheory – Application - Implementation
4
CONSUMER MARKETING [B2C]
MARKETS AND CONSUMER BEHAVIOR
WHAT IS A CONSUMER?
• The ultimate user [B2C or B2C] that selects, purchases, uses, and disposes of goods or services to satisfy needs and wants.
• U. S. consumer motivation– Needs are never fully satisfied.– New needs emerge as old needs are
satisfied.– People who achieve their goals set new and
higher goals for themselves.
A MODEL OF BUYER BEHAVIORMarketing andOther Stimuli
Marketing andOther Stimuli
Buyer’s Black BoxBuyer’s Black Box
Buyer’s ResponseBuyer’s Response
Product
Price
Place
Promotion
Economic
Technological
Cultural
Other
Buyer Characteristics
Buying Decision Process
Product Choice
Brand Choice
Seller Choice
Purchase Timing
Amount →
VALUE
This slide is likely from an earlier Kotler text circa 2000-2010. Some words have been changed or deleted.
The purchase decision process consists of five stages.
FEEDBACK
CONSUMER BEHAVIOR Problem recognition
Graphic is from MARKETING, Kerin, Hartley, Rudelius, 10E, McGraw-Hill Irwin, p. 112, 2011. ISBN 13: 978-0-07-352993-6
CONSUMER BEHAVIOR Information search
• Internal search– Your existing knowledge base
• External search– Personal sources– Public sources– Market sources
• Ads, internet, sales brochures, sales people, …
CONSUMER BEHAVIOR Purchase Evaluation
• Evaluation criteria– The attributes of a product and/or service
the consumer uses to compare different items. [You-Tube]
• Consideration set– The group of brands and products that a
consumer considers acceptable . [TV]
CONSUMER BEHAVIOR The purchase decision
• Once the consumer believes they understand the real and perceived value of a purchase they must decide – from whom to buy,– where to buy,– when to buy, and– how to buy.
CUSTOMER FOCUS:THE VALUE OF A SATISIFIED CUSTOMER
• Customer retention [satisfaction]
• Keeping disenchanted customers
• Getting new customers [prospects]
• The problem of ex-customers– No longer need the product– Unhappy with the product
CONSUMER BEHAVIORPostpurchase
Consumer’s Expectations of Product Quality
Performance
Ease of use
…
Satisfied Customer Unsatisfied Customer
COGNITIVE DISSONANCEDoubt or regret about a purchase
CLASSIFICATION OF CONSUMER PRODUCTS
Shopping Products
> Considerable selection time & effort> Moderately brand loyal> Comparison shop> Few locations
Clothing, appliances, services
Convenience Products
> Frequently purchased> Little effort> Low priced> Numerous locations
Staples, impulse items
Specialty Products
> Unique characteristics> Significant purchase efforts> Brand – limited locations
Hobby purchases, Rolex watch
Unsought Products
> Little awareness or interest until need > Require much advertising & personal selling
Insurance, some innovations
Emergency Products
> Unexpected need> Speed with little to no brand loyalty
Emergency room, ambulance, towing
Evaluate how you think about these different types of purchases.
This slide is likely from an earlier Kotler text circa 2000-2010.
CONSUMER BEHAVIORInvolvement and problem solving• Involvement is the total of the personal,
social, and economic significance of the purchase to the consumer.– Routine problem solving
• A pack of gum
– Limited problem solving• A new business suit
– Extended problem solving• Your first new house
CONSUMER BEHAVIORInvolvement and problem solving• Low involvement product marketers should
– Focus on easy to identify and remember– Avoid stockouts– Reduce cognitive dissonance with ads,
POP displays, …
• High involvement product marketers should– Promote, picture, and stress benefits– Strong sales skills, service, and consumer
engagement
• SOCIAL SURROUNDINGS– Where is the store? What type of people?
• PHYSICAL SURROUNDINGS– What do you notice when you go into a store?
• TIME– Does the time of day affect your shopping?– How do you shop if you are in a hurry?
• MOODS– How does being unhappy affect your shopping?– How does the amount of money you have …
CONSUMER BEHAVIORSituational influences
CONSUMER BEHAVIORFour types of buying decisions
ComplexBuying
Behavior
Dissonance-Reducing Buying
Behavior
Variety-SeekingBehavior
HabitualBuying
Behavior
Significantdifferences
betweenbrands
Fewdifferences
betweenbrands
HIGH INVOLVEMENT[Quality – Service – Facts]
Use personal sales – quality, facts, service
LOW INVOLVEMENT[Obvious differences]Use advertising, POP, emotional perceptions
DURABLE GOODS[Furniture, appliances, long-lasting items…]Use subjective appeals, advertising
NON-DURABLE GOODS[Grocery items, frequent purchases, …]Use sales promotion, price
This slide is likely from an earlier Kotler text circa 2000-2010.
CUSTOMER INVOLVEMENTCLASS EXERCISE
Quality Color Price Brand Distance
Canned
peas
CONSUMER BEHAVIORPsychological influences - Maslow
CONSUMER BEHAVIORPsychological influences - Maslow• Personality type
• Self-concept
• Normal perception– Selective perception to selective retention
• Subliminal perception
CONSUMER BEHAVIORPsychological influences - RISK
• Methods of consumer risk reduction– Obtain Seals of Approval– Provide
• Free trials or samples• Simple and complete instructions• Warranty or guarantee• Endorsements
– Strengthen the relationship leading to• Brand loyalty
– The propensity to purchase the same brand over time.
CONSUMER BEHAVIORPsychological influences - ATTITUDES• Attitude formation is a learned behavior
based on– Values
• Fundamental basis of one’s beliefs and way of life
– Beliefs• A perception of expectations
CONSUMER BEHAVIORPsychological influences - ATTITUDES• Attitude change
– Changing beliefs• The brand• Its attributes
– Importance of each attribute
– New product beliefs and attributes
CONSUMER BEHAVIORPsychological influences - LIFESTYLE
$
R
E
S
O
U
R
C
E
S
CONSUMER BEHAVIORPsychological influences - INFLUENCERS
• Opinion leaders – personal and social
• Word of mouth
• Reference groups
CONSUMER BEHAVIORPsychological influences - FAMILY
Graphic is from MARKETING, Kerin, Hartley, Rudelius, 10E, McGraw-Hill Irwin, p. 129, 2011. ISBN 13: 978-0-07-352993-6
CONSUMER BEHAVIORSocial influences - SOCIAL
• Class– Upper, middle, lower [working]
• Culture– Subculture
• African-American, Asian-American, Hispanic buying patterns
THE CONSUMER PERCEPTION
ISTHEIR REALITY!
TEST REVIEW
• You need to learn the• Models• Vocabulary
• You need to understand• What you do with each part of the model• Relationships
• Select the best answer!
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