MARKETING Theory – Application - Implementation Introduction to the course.

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.


• 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.


• 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


1.8 1.3 0.8 0.3 0.3 0.8 1.3 1.8

Under 1 year5 years


85+ years

AG

E

Percent

Male Female

• Source: U.S. Census Bureau, Decennial Census 2000

Working Age

20-65

Males Females


1.8 1.3 0.8 0.3 0.3 0.8 1.3 1.8

Under 1 year5 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


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 & Its Perception– How do you assess value? Clothing

• Value Strategies– are all about real and/or perceived

meaningful differentiation!


• Remember – there is only one best!

• Best? Price

• Best? Service

• Best? ProductBest perceived / proven value …

Best perceived solution …

for my situation.


• 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?


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


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

http://www.census.gov/

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

http://www.city-data.com/county/Lubbock_County-TX.html

DEMOGRAPHIC TRENDS: AGING

http://www.census.gov/ipc/www/idb/pyramids.html

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


• Intellectual property protection– Copyright Law– Trademark Law– Patent Law– Trade Secret Law– Knowledge Management


• 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


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


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.


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


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


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!

MARKETING Theory – Application - Implementation Introduction to the course.

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