www.le.ac.uk

Welcome toMARKETING DESIGN & OPERATIONS

workshop v1.3

Samer YamakAssociate TutorUniversity of LeicesterSchool of Management

Agenda• Overview of Marketing

• Relationship Marketing

• Marketing Design

• Marketing Mix

• Strategic Marketing

What is Marketing?There are many definitions of marketing.

• Old Definition: Act or practice of advertising and selling a product (house Webster dictionary of American English 1997)

• “Marketing is the process and execution of the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals” (American Marketing Association, 2004).

• “Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others”

• The Simplest Definition is: “Marketing is managing profitable customer relationships” (Kotler, 2011)

• Get the Attention of the intended buyers within the targeted market segment.

• Create and Interest in the product or service.• Capitalize on the Desire of the prospect for the product or service.• Ensure that the prospect takes Action to acquire the product or service

AttentionInterestDesireAction

AIDA

What is Marketing?

Marketing Overview• A process for enacting exchange to mutually satisfying exchange

relationships occurring often in the market environment.

• Largely related to the particular needs and wants of the populations of any society. Involves a suitable planning and implementation of a marketing strategy to address a given situation.

• The real challenge of marketing is how it can help creating markets and retaining customers in a highly competitive economy

• “Marketing Myopia” focused on why companies grow in power and then later on decline due to their increasing focus on their products at the expense of the needs of the customers

Role of Marketing• Marketing is way of creating a strategy to influence (iphone!)

• The marketing environment is one you choose - not one that is constrained

• Marketing needs to adapt to the market environment (Pepsi cola in Japan)

• Marketing role is to create a perceived value that is better than the competition

• Marketing is a long term strategy

“It’s more important to do what is strategically right then what is immediately profitable”. Discuss !

Examples of Marketing Offers (Marketing Scope) • Goods

• Physical goods, products, equipment, tools• Services

• Airlines, hotels, Professionals like engineers / doctors / lawyers / management consultants…

• Experiences• Walt Disney, Wild Wadi, Hard Rock Café, Planet Hollywood

• Events• GITEX / Riyadh, Exhibition, CeBit…

• Persons• Tom Cruise, Angelina Jolie, Tiger Woods, Michael Schumacher

Examples of Marketing Offers (Marketing Scope) • Places

• Beirut, Dubai, London, Sharm Al-Sheikh…• Properties

• Emaar / Dar Al-Arkan / Tatweer etc…• Organizations

• Emirates, Aramco P&G / J&J / Philips, STC, Mobily, Zain…

• Information• (Fashion magazines / Property Weekly)

•Not exactly -but to a certain extent yes

•NPOs–(they may want to realize other objectives)•Charities ?•Government agencies ?•Political parties ?•Individuals ?

•Other objectives could be:•Raising awareness of a social cause (Righting Smoking)•Improving health of a society by change of behavior (H1N1)•Attracting visitors to a free exhibition at a museum

Is marketing limited to “meeting needs profitably”?

Consumers’ Needs, Wants & Demands

Needs - state of felt deprivation including physical, social, and individual needs i.e hunger. Ex: You may drink water as a need

Wants - form that a human need takes as shaped by culture &

individual personality i.e. American & Indian foods. Ex: You may want a Pepsi or Barbican to quench your

thirst as a solution other then water

MARKETING should ascertain between NEEDS and WANTS which is crucial to facilitate exchange

•PROCTER & GAMBLE:OLESTRA is a tasty but less fatty food to fight obesity

•IKEA:Created knock-down furniture for people who wanted good furniture at a

substantially lower price and easy to assemble/dismantle and use & move

when required

•SAP:“Outrun competition, run SAP”. SAP injected the idea of beating

competition as a need to have the SAP system bought by customers

These examples show a drive to turn a private or social need into a profitable opportunity

Identifying and Meeting human & social needs

NEEDS Maslow’s Pyramid

Marketing Activity

WHY??

Physiological needs can be satisfied unlike other needs that are infinite.

Physiological Needs

Security

Belonging

Self Esteem

SelfRecognition

GILLETTE Which need?

From a Physiologic Need to a need of Self Esteem and Self Accomplishment!

The history of marketingOrientation Characteristics Summary Period

Production Era Increase production, economies of scale, cost reduction

“Any color as long as it’s black”

Up to the 40’s

Product Era Quality is all what matters, profit through volume

“just look at the quality of the paintwork”

Up to the 60’s

Sales Era Aggressive sales, profit through quick turnover & volume

“You are not keen on black, how about a finance deal?”

60’s and 70’s

Marketing Era Integrated Marketing, Defining of needs, Profit through repeat business & loyalty

“Let’s find out if they want black and will pay extra for it”

70’s and 80’s

Marketing Evolution

MASS MARKETINGNot differentiated Before the 70th …

SEGMENTED MARKETING 70th and 80th

ONE to ONE MARKETING

90th and 2000

Nowadays: all marketing forms are coexisting:

MASS MARKETINGNot differentiated

SEGMENTED MARKETING

ONE to ONE MARKETING+ +

Marketing is becoming more and more diverse

Operational Marketing Development Marketing

Telemarketing Trade Marketing Customer Marketing

Channel Marketing Direct Marketing

Different kinds of Marketing for many definitions of marketing

Marketing B to C

Marketing B to B

Marketing B to B to C

Service Marketing

Relationship MarketingStreet Marketing

Marketing and Operations Management (MOM)

Marketing and Resources Management (MRM)

Organizational process to create value

Needs / Expected Value Targeted Value

Perceived Value Proposed Value

Customer Company

Listen

Communication

Experience

Company PerformanceSatisfaction

Ex: by closely monitoring market needs, Cirque du soleil redefined market standards by creating a new perceived value in the cirque business . 7 months after their launching, they achieve more then 60% market share in US

Organizational process to create value Possible defaults

Needs / Expected Value Targeted Value

Perceived Value Proposed Value

Customer CompanyWrong listening

Too many promises

Wrong interaction

Bad implementationIn-Satisfaction

What’s a perceived value?

Perceived Value Experience

Satisfaction

No Satisfaction

Value of competition offers

Re-purchase

Customer run away

Perceived cost• Price• Efforts (Lurpak)• Time• Risk• Switch cost…

Perceived product• Principal Product• Performances• Quality• Associated services• brand…

CUSTOMER ≠ CONSUMER ?

For example, a store that sells primarily toys would have the adult, or purchasing unit, as the “customer” and the children as “consumers” or “end user”.

Identifying and servicing the needs of BOTH the customer / purchasing Unit and the consumer / end user are crucial to sustaining competitive advantage!

Consumer

What is Consumer Behavior?

• The behavior that consumers display in seeking, purchasing, using, evaluating and disposing of products that they expect will satisfy their needs.

• Customer Behavior is the study of how individuals make decisions to spend their resources on need satisfying goods and services.

Consumer

The Buyer Decision Process

• Need Recognition• Information Search• Evaluation of Alternatives• Purchase Decision• Post purchase behavior

The buyer Decision Process (Cohen)

Exchange OverviewExchange relationship:

Restricted Exchange: A buyer and a seller with a content to exchange such as product, service, knowledge, time or a gift. Both parties accrue mutual benefit from the exchange

Generalized Exchange: reciprocal relationship with at least 3 parties where each party does not benefit directly from the other. For ex: A Vendor sponsors a partner’s event with giveaways for end users attending the event.

Complex Exchange: Mutual relationships with at least 3 parties with at least one direct exchange between every 2 parties: Vendor exchanges with wholesaler exchanges with Retailer.

Relationship Marketing PerspectiveSales Sales

Operational Marketing Relationship Marketing

Retaining customers is 3 to 10 timesLess expensive than attracting new ones!

Relationship Marketing• Unlike managerial marketing measuring success

through market share, RM concentrates on efficient attraction and development of long-term relations between organization and its stakeholders to realize a financial benefit.– Buttle (1996): It is cheaper to retain a customer

then to attract new one– Czepiel (1990): It is 5 to 10 times more expensive to

attract a new customer then to retain an existing one.

• RM is a major part of a larger movement generated by the increasing need to get closer to customer

Relationship Marketing• RM fails in consumer markets due to lack of interest real

relationship, persistence of aggressive advertising and sale promotion-driven strategies (hit & run).

• Yet, RM was still used in consumer market (i.e. loyalty cards, retail clubs, helplines, direct mail…)– Gillette / Head & Shoulders road show– Red bull competition of cars, bikes, motorcycles– Dell international hotlines and

Same-Business-Day visit– Sony’s 10% rebate for every SR 5,000+ purchase.

• RM is often customized by practitioners who tailor marketing theories only to enhance firms performance

Measurement of Marketing• Marketers should prove their contribution to

shareholder value by:– generating profits, – reducing costs, – developing markets, – ensuring close relationships with customers, – ensuring that the organization has enough

resources to maintain and enhance market position

– Being responsive to the market

• While marketers rely on financial indicators (sales income, sales growth…), it is difficult to isolate marketing activities from other internal activities.

• The solution was to use Brand equity to allow brand owner to monitor the evolution of the brand and compare the effectiveness of marketing performance– Brand equity is the confidence a customer group has in a

product/service & their willingness to purchase that brand relative to competing brands.

– BE can be measured by customer loyalty, market share, customer awareness, customer preference and intent to purchase (BE = Tangible assets – Financial value of firm)

Measurement of Marketing

Marketing Stages• Know the market

– using market researches and systematic and objectives studies

• Adapt to Market– creating an offer with an attractive perceived

added value that is different

• Influence the Market– communicating strong promises

Marketing Functions•Research Marketing

–Market study (surveys)–Competition positioning (Nielsen, Gartner in IT, etc.)–Control of the marketing efficacy

•Strategic Marketing–Choosing a targeted market–Define the positioning of the company or the brand positioning–4P (Product concept + services, Price strategy, distribution channels–Communication strategy–Relationship strategy

•Operational Marketing–Building communicational and promotional campaign–Actions with selling people–Direct marketing–Distribution and merchandising–Customer service

Market Segmentation

• Marketing Segmentation: is “Dividing a market into distinct groups of buyers who have distinct needs, characteristic, or behavior and who might require separate products or marketing mix” (Kotler & Keller, 2011).

Example of SegmentationDemographic:

- Gender- Age- Physical characteristics (eye color, height, etc.)- How many people live under the same roof- Family structure (married, divorced, etc.)- etc.

Geographic:- Continent- Region of the world- Size of the city- Climate- etc.

Psychographic:- Interests- Activities- Opinions- etc.

Behavioral:- Occasions- User status- Loyalty status- etc.

Target Marketing

• Target Marketing: “The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter” (Kotler & Keller, 2011).

Targeting – Different strategic optionsUndifferentiated Marketing

• Due to low competition• Because of undifferentiated products• To keep a competitive cost structure (ex: easyJet)

Differentiated Marketing

• To cover all segments with adapted assortment (ex: L’Oreal, P&G, Harrods. Etc.)

• to cover only selected segments highly profitable (ex: the “Big Four” Deloitte & Touch, Ernest & Young, KPMG, Price Waterhouse Cooper working only with big companies)

Concentrate Marketing

• Concentration on main segments• Concentration on a niche

Customized Marketing

• 1-1 marketing• more and more common (ex: Direct Marketing)

Market Positioning

• Market Positioning: “Arranging for a products to occupy a clear, distinctive and desirable place relative to competing products in the mind of target consumers” (Keller, 2011).

Positioning- 6 criteria for a good Positioning -

• Your POSITIONING has to be:• Clear • Attractive• Credible• Different• Profitable• Long-lasting

Positioning – Crucial for your Marketing Strategy

The chosen POSITIONING will influence your strategy

Product strategy Price strategy Distribution

strategy

Communication strategy

!The positioning has to be constant through time! (if you change your positioning too often, you will lose your customers)

BRAND Definition A brand is a collection of symbols, experiences and associations connected with a product, a service, a person or any other artifact or entity.

Is Barack Obama a brand?

Marketing Mix

• Marketing Mix: “The set of controllable tactical marketing tools – product, price, place and promotion – that the firm blend to produce the response it wants in the target market” (Kotler & Armstrong, 2011).

Marketing Mix

4 Ps ProductHere are some questions to assess the competitiveness and ‘fit’ of yourproduct:• Does the product has the right positioning in the market?

• Does it serve a particular segment of the market?• Is it a mass market or a niche product?• Is it differentiated enough to stand out against the competition?

• What kind of brand equity does the product uphold?• What are some of the issues/risks associated with the “image” or “perception”

of the brand relative to other brand in the market?• What are some of the features that can be added to the product that would add

to the value or the perception of the value to the consumer?• What are some of the packaging issue that might present an opportunity or

impediment to increased sales?• Does my packaging reflects the positioning of the product? If mass market, does

it have mass market appeal?• How does the product achieving in the overall strategy of the company?• How does the product relate to other products produced by the company?• What kind of financial role is the product playing (ie. Cash cow, long term profit

potential, etc.)

POSITIONING MAPThis is a helpful framework to analyze where the product is positioned against competitors and

consumer segments and to help you to determine if there is any untapped opportunity in the market.

LowLow

High

High

Price

Value

Premium

UnderPriced?

Commodities

Branded Commodities

4 Ps Product

Getting the right price for the product is extremely important for the success of a company. However, the right price is not easy to determine. Depending on the price elasticity of the product, 1% increase in price could drive to -20% or +25% in sales!

Factors that determine the price

• Customer’s perceived value

• The cost to produce COGS Low cost = bigger profit margin

• The price paid previously = the expected price:if consumer are used to pay a certain price for the product, it is very difficult to convince them to pay $20 more. However, if the perceived value of the value is higher than what they paid in the past, then there’s room to capture some consumer surplus.

• The price of substitutes:the price of a product is driven down if the product can be easily substituted by another that serves the same function.

“There are two fools in every market. One charges too little; One charges too much.” (Russian proverb)

4 Ps Price

Perceived value to consumer

Price of a substitute

Expected price

Cost of goods sold

0$

Competition pushes price down

Marketing pushes price up

Set price here!

Surplus value created for the conusmer

Profit margin: Value created for the seller

4 Ps Price

Price ElasticityImpact of price changes on sales volume

Demand is elastic ifa price increase has alarge negative impact

on sales volume.

Demand is inelastic ifa price increase haslittle or no impact on sales volume.

The distribution channel that is selected and the outlets at which the product is sold MUST be aligned with the positioning of the product and focused customer segment. (McDonalds corner locations)

Here are a few questions you should ask yourself:• Which channels are most closely aligned with the company's strategy?

• Does the company need to build new channels or eliminate existing one?• What functions does the company want the channels to serve?• Does it make more sense to go direct to the end user or deliver the product through

intermediaries?• What are the economics of the channel?

• Who needs to capture what margin?• Does it fit in the intended selling price of the product?

• How much control is the company willing to give up on the delivery of the product?• Is the company willing to work in conjunction with the distribution channel, by monitoring its

timeliness and service, or by placing most of the weight on the channels in meeting customer needs?

• What would be the relationship of the company's sales force in this arrangement?• How would the company address any potential shifts in power to the channel?

4 Ps Place

Promoting and developing a specific brand for the product captures the most value not only by the supplier in being able to increase the sales volume and per unit margin, but also by the consumer in developing a certain perception of the product.

Promotion and branding can consist of a number of elements such as traditional advertising (mass and niche), or no advertising to maintain certain perception of exclusivity, word of mouth, direct mail, etc.

• What messages are we trying to communicate? What is the objective?• Is the goal to achieve a household name? Build loyalty? Defend the product’s positioning?• Does the message portray the total customer experience?

• What are some of the barriers to communicate the desired message?• Does the promotion/branding focus on the long term view of relationship-building with the

consumer?• Does it encourage repeat purchasing? Focus on customer retention?

• How is the marketing strategy different from the competition?• How will the competition react?

• Which vehicle will you use to influence the decision making process?• Pull strategy (direct at end user): use of advertising, direct mail, telemarketing, word of

mouth, consumer promotions• Push strategy: use the trade promotion, sales aids and/or sales training programs

• How much money is allocated to marketing?

4 Ps Promotion

• Includes:– Micro-environment: actors close to the company

that affect its ability to serve its customers.– Macro-environment: larger societal forces that

affect the microenvironment.• Considered to be beyond the control of the

organization.

Marketing Environment

PESTLE - Actors in the Macroenvironment• Political

• Tax Policies• International Trade regulations• Contract Enforcement law• Employment Laws• Government Organization• Competition Regulation• Political Stability• Safety Regulations

• Economic• Interest rates & monetary policies• Government spending• Unemployment Policy• Taxation• Exchange rates• Inflation

• Social• Income Distribution• Demographics, Population• Labor / Social mobility• Lifestyle changes• Work/career and leisure attitudes• Education• Fashion• Health consciousness• Living conditions

PESTLE - Actors in the Macroenvironment• Technological

• Government spending• Industry focus • New inventions and development • Rate of technology transfer• Life cycle & speed of technological obsolescence• Energy use and costs• Changes in IT and Internet• Changes in Mobile Technology

• Legal• Current and impending legislation• Employment, competition and health and safety• Anticipated changes in legislation in main trading partner countries• Governmental trading policies• Regulatory bodies of the industry

• Environmental• Pollution created by the product or service• Recycling possibilities • Attitudes to the environment from the government, media and consumers

Porter 5 Forces

Objective: Assess the industry if it’s attractable and decide whether a company should enter / exit the industry or find a position in the industry where it can best defend itself against these forces or can influence them in its favor.

A French soft drink company, Le Paris, is looking to diversify its holding by investing in a new fast food chain in the US. You are hired to determine whether they should pursue this path and, if so, how they should go about execution?

Case Study : Le Paris

Use the Porter’s five forces model as a basis for your answer

Duration: 20 min.

Porter’s Generic competitive strategies

Sources of Competitive advantage

IndustryScope

Differentiation

IndustryWide

Segment Only

Cost Leadership

Differentiation Strategy

Focus (Niche) Strategy

Cost

Stuck in the middle

Low-Cost Provider Strategies

Low-cost leadership means low overall costs, not just low manufacturing or production costs!

The keys to success are:• Make the entire firm aiming at constantly achieving

meaningful lower costs than rivals• Include features & services in product offering that buyers

consider essential• Find approaches to achieve a cost advantage in ways

difficult for rivals to copy or match

Translating a Low-Cost Advantage into Higher Profits

Option 1: Use lower-cost edge to under-price competitors and attract price-sensitive buyers in enough numbers to increase total profits (Baik)

Option 2: Maintain present price, be content with present market share, and use lower-cost edge to earn a higher profit margin on each unit sold,thereby increasing total profits (Mcdonalds)

Differentiation Strategies

• Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals

• Find ways to differentiate that create value for buyers and are not easily matched or cheaply copied by rivals

• Not spending more to achieve differentiation than the price premium that can be charged

Objective

Keys to Success

Benefits of Successful Differentiation

A product / service with unique, appealing attributes allows a firm to

Command a premium price and/or

Increase unit sales and/or

Build brand loyalty

= Competitive Advantage

Whichhat is

unique?

Product Differentiation

Potential product

Augmented product

Expected product

Core product

• Possible but not expected ad-ons e.g. car valeting at Suleiman Al Habib’s clinic, Riyadh

• Add-ons beyond expectation of consumer – freshness of coffee, superior taste,

• What consumers expect• Acceptable taste, functionality

in software

• Generic product-• software, coffee, education

Focus / Niche Strategies• Involve concentrated attention on a narrow piece of the

total market

Serve niche buyers better than rivals

• Choose a market niche where buyershave distinctive preferences, specialrequirements, or unique needs

• Develop unique capabilities to serveneeds of target buyer segment

Objective

Keys to Success

Applications of PLC Assessment

• Can provide a detailed breakdown of the magnitude of various supply chain impacts along each step in the product lifecycle

• Can be used to model different product & packaging development design options

• Useful for determining the product mix for the different stages in the life cycle.

Benefits of PLC• The product life cycle concept helps

marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face

• Useful for monitoring sales results over time and comparing them to those of products having a similar life cycle

• The life cycle concept may apply to a brand or to a category of product.

• Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile.

Limitations of PLC• Products do not always have a clearly

predictable life• The specific life cycle curves followed

by different products can vary substantially • The life cycle concept is not well-suited for

forecasting of product sales• The product life cycle may become self-fulfilling

BCG Matrix

BCG or Growth-Share Matrix Stars: - Leaders in business; generate good cash- Use large amounts of cash to maintain position- Best profit growth & investment opportunities available to company

Cash Cows:- Superior market position at Low costs- High Profits & Cash generation- Company foundations (pay overhead, cash for other invest.)

Dogs:- Poor competitive positions, poor profits/growth (“Cash Traps”)- Should minimize assets remaining in this category

Question Marks:- High cash needs due to growth stages- Low cash generation due to low market share

Disaggregate a company into business units and analyse their strengths compared to business opportunities

Devise separate strategies for each business unit. Allocate resources where needed to manage the portfolio.

Corporate strategy comes down to managing a portfolio of products

BCG Matrix is NOT about market share and market growth; it’s about mobilizing the organization resource to interact with external circumstances.

Benefits of Growth-Share Matrix

Market Penetration

Product Development

Market Development Diversification

Ansoff’s Product/Market Expansion Grid

Existingmarkets

Existing Products New Products

Newmarkets

The supply chain through which a product/service goes through to reach the end consumer.

Asking a number of insightful questions on the effectiveness and efficiency of certain steps in the value chain would display insightful understanding of the internal workings of the company.

Supplier Manufacturer Wholesaler Retailer End Customer

Value Chain

Value Chain Model by PorterPorter argues that the ability of an enterprise to generate profits depends onits ability to realize added value, its ability to derive revenues in its downstreammarkets in excess of its costs of production (P.38)

7S Framework

Hard Ss

Soft Ss

• The core seems simple; strategy is concerned with identifying opportunities in the external environment to exploit outperforming rivals.

• The most important part of SWOT analysis is not developingthe 4 lists of strengths, weaknesses, opportunities, and threats, but rather using the 4 lists to draw conclusions and build strategies to act on them.

SWOT Analysis

Innovation in Marketing• Creates new ways to conduct research including more

sophisticated methods for monitoring and tracking customer behavior and analysis data

Marketing Research

• Allows for extreme target marketing where marketing-to-person is replacing mass marketing. For customer services, technology makes it easier to manage relationships and allows for rapid response to customer’s needs

Targeting Markets

• Creates new digital products/services. Incorporation of innovation into existing product/service enhances value by offering improved quality, features & reliability at a lower price

Product

• New techniques allow better matching of promotion to customer activity and individualized promotion. Makes it easier for sellers to offer product suggestions and promotional tie-ins

Promotion

• Creates new channels for distribution and transaction (e.g. e-commerce) that include making it easier for buyers to place orders. Allows more control over inventory management and closer monitoring of product shipment

Distribution

• Enables the use of dynamic pricingPricing

Implementation Scenario Planning

Control Scenario Planning

SMART Objective: Specific, Measurable, Acceptable, Realizable, Time-able

Control GAP Analysis

Control GAP Analysis

Control GAP Analysis

Control GAP Analysis

www.le.ac.uk

End of MDO Module