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1 Marketing BMEGT20MW01 Department of Management and Corporate Economics, building Q, room B 303b email: [email protected] Gyorgyi Dano Lecturer: Gyorgyi Dano Exam schedule, materials 2 https://goo.gl/xxma7s Gyorgyi Dano uti.bme.hu 3 Materials Kotler, P., Armstrong, G. (2016): Principles of Marketing 16th Edition, Pearson Lecture slides Gyorgyi Dano Chapter 1,2,3,4,7 4 Learning option MyMarketingLab http://www.pearsonmylabandmastering.com Optional! Gyorgyi Dano Registration instructions: Student Registration Handout for MyMarketingLab.pdf 5 Marketing is a process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Philip Kotler Gyorgyi Dano Definition of marketing Copyright © 2016 Pearson Education, Inc. Gyorgyi Dano The Marketing Process - marketing in a nutshell 6 7 States of felt deprivation. Wants Demands Form that needs take as they are shaped by culture and individual personality. Wants backed by buying power. Marketers do not create needs, they influence wants! Gyorgyi Dano Needs Physical - food, clothing, warmth, safety Social - belonging and affection Individual - knowledge and self-expression 8 a product is only a tool to solve a consumer problem… Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Gyorgyi Dano Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs. Copyright © 2016 Pearson Education, Inc. Gyorgyi Dano A Market is the set of actual and potential buyers of a product or service. These buyers share a particular need or want that can be satisfied through exchange relationships. 9 10 Gyorgyi Dano • What customers will we serve (what’s our target market)? • How can we serve these customers best (what’s our value proposition) ? Production concept Product concept Selling concept Copyright © 2016 Pearson Education, Inc. Marketing concept Societal Marketing concept Gyorgyi Dano What philosophy should guide these marketing strategies? Company orientations (concepts) 11 12 Production orientation "Any customer can have a car painted any colour that he wants, so long as it is black.„ (Henry Ford) Gyorgyi Dano Consumers: available, Company: improving highly affordable production products and distribution efficiency 13 Product orientation Company: continuous product improvements marketing myopia? Gyorgyi Dano Consumers: the most quality, performance and innovative features 14 Consumers: do not buy enough https://www.youtube.com/watch?v=aLKJFSi14gk unsought goods Company: aggressive selling and promotion Gyorgyi Dano Selling orientation 15 Consumers: value and satisfaction; existing and latent needs Company: determining consumer wants and being more effective than competitors; find the right products for your customers Gyorgyi Dano Marketing orientation 16 concept is the idea that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long-run interests. Gyorgyi Dano Societal marketing list recognizes companies that have had a positive social impact through activities that are part of their core business strategy. http://beta.fortune.com/change-the-world 17 Gyorgyi Dano Fortune’s “Change the World” list - doing good for society and running a successful business The Change the World 18 Target market Gyorgyi Dano The marketing mix: set of tools (four Ps) the firm uses to implement its marketing strategy. It includes product, price, promotion, and place. Integrated marketing program: comprehensive plan that communicates and delivers the intended value to chosen customers. 4P – 4C 19 (Traditional vs. Value based view of the Marketing Mix) Product Customer 4C Customer solution Price Customer cost Place Convenience Promotion Communication Gyorgyi Dano Seller 4P 20 satisfied customers remain loyal and talk favorably to others about the company and its products Gyorgyi Dano Customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. 21 The difference between total customer value and total customer cost. Customer satisfaction The extent to which a product’s perceived performance matches a buyer’s expectations. Total customer value = It is the bundle of benefits customers expect from a product or service. Total customer cost = It is a bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of a product or service. Gyorgyi Dano Customer-perceived value 22 Total Customer Value Monetary cost Time cost Energy cost Psychic cost Delivered value Total Customer Cost Kotler (2000:35) Gyorgyi Dano Product value Service value Personnel value Image value Share of customer is the portion of the customer’s purchasing that a company gets in its product categories. Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of patronage. Customer equity is the total combined customer lifetime values of all of the company’s current and potential customers. Gyorgyi Dano 23 The environment of a company 24 The macroenvironment consists of larger societal forces that affect the microenvironment. Györgyi Danó The microenvironment consists of the actors close to the company that affect its ability to service its customers. Macroenvironment: Demographic Economic Natural Technological Political and legal Cultural and social Microenvironment: Company Suppliers Intermediaries Competitors Public Consumers Györgyi Danó The environment of a company 25 Demography is the study of human populations size, density, location, age, gender, race, occupation, and other statistics. Demographic environment involves people, and people make up markets. • Ageing population • Rising life expectancy • Declining fertility rate • Increasing number of working women • Smaller family size • Urbanization • etc. Gyorgyi Dano Demographic Environment 26 27 Economic Environment Industrial economies are richer markets. Subsistence economies consume most of their own agriculture and industrial output. Györgyi Danó Economic environment consists of factors that affect consumer purchasing power and spending patterns. Natural resources that are needed as inputs by marketers or that are affected by marketing activities. Trends: • Increased shortages of raw materials • Increased pollution • Increased government intervention • Increased environmentally sustainable strategies Györgyi Danó Natural Environment 28 29 • Most dramatic force in changing the marketplace • New products, opportunities • Concern for the safety of new products Everything will be connected! Györgyi Danó Technological Environment 30 Political and Legal Environment Laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. Cultural environment consists of institutions and other forces that affect a society’s basic values, perceptions, and behaviors. Györgyi Danó Cultural and Social Environment 31 • Top management • Finance • R&D • Purchasing • Operations • Accounting Suppliers • Provide the resources to produce goods and services • Treat as partners to provide customer value Györgyi Danó Company 32 Intermediaries Help the company to promote, sell and distribute its products to final buyers. Competitors • Marketing services agencies • Financial intermediaries Firms must gain strategic advantage by positioning their offerings against competitors’ ones. Györgyi Danó • Resellers • Physical distribution firms 33 Publics Government publics Local publics General public Internal publics Citizen-action publics Györgyi Danó Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. Media publics Financial publics 34 Györgyi Danó Financial publics: This group influences the company’s ability to obtain funds. Media publics: This group carries news, features, and editorial opinion. Government publics: Management must take government developments into account. Citizen-action publics: A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups, and others. Local publics: This group includes neighborhood residents and community organizations. General public: A company needs to be concerned about the general public’s attitude toward its products and activities. Internal publics: This group includes workers, managers, volunteers, and the board of directors. Consumer markets consist of individuals. Business markets buy goods and services for further processing or use in their production processes, whereas reseller markets buy goods and services to resell at a profit. Government markets consist of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them. International markets consist of these buyers in other countries, including consumers, producers, resellers, and governments. Györgyi Danó Customer 35 36 Strategic planning Gyorgyi Dano The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. 37 The mission Product oriented: We sell tools and home repair and improvement items. Market oriented: We empower consumers to achieve the homes of their dreams. Gyorgyi Dano A mission is a general, enduring statement of overall organizational purpose. The mission statement should be market oriented! Setting Company Objectives and Goals 38 • Build profitable customer relationships • Invest in research • Improve profits • Increase market share • Create local partnerships • Increase promotion Györgyi Danó Business objectives Marketing objectives 39 Business portfolio planning Business portfolio planning involves two steps: • analyzing current business portfolio and determining which businesses should receive more, less, or no investment • shaping the future portfolio by developing strategies for growth and downsizing Györgyi Danó Business portfolio: the collection of businesses and products that make up the company. On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market. 40 Györgyi Danó Copyright © 2016 Pearson Education, Inc. BCG Matrix Market share The total number of units of a product expressed as a percentage of the total number of units sold by all competitors in the market. Relative market share Market share of a company or a business unit divided by that of its largest competitor. Stars: generate considerable income Strategy: invest more funds for future growth Cash Cows: generate strong cash flow Strategy: use profits to finance growth of Stars and Question Marks Question Marks: have potential to become a Star Strategy: either invest more funds for growth or consider disinvesting Dogs: generate little profits Strategy: consider withdrawing Gyorgyi Dano Elements of the BCG Matrix 41 42 The Product/Market Expansion Grid Existing products New products New markets Copyright © 2016 Pearson Education, Inc. Györgyi Danó Existing markets Market penetration strategy Increase market share Increase product usage: frequency, quantity, new application Market development strategy Expand markets for existing products: geographic expansion, target new segments 43 Product improvement Product line extensions New products for the same markets Diversification strategy Vertical Integration (forward or backward) Diversification into related businesses Diversification into unrelated businesses Györgyi Danó Product development strategy Internal External Positive Negative Györgyi Danó Copyright © 2016 Pearson Education, Inc. 44 SWOT Analysis A marketing objective should be: • Realistic Marketing planning • Measurable • Time specific involves choosing • Compared to a marketing strategies benchmark that will help the „To increase sales of company attain its Purina brand cat food by overall strategic 15% over objectives. 2017 sales of $300 million.” Gyorgyi Dano Marketing planning 45 46 Marketing information system (MIS) refers to the people and procedures dedicated to assessing information needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights. Gyorgyi Dano Marketing Information Systems (MIS) 47 Marketing Information Systems (MIS) Marketing intelligence Marketing research Competitive Marketing Intelligence: is the systematic collection and analysis of publicly available information about consumers, competitors, and developments in the marketing environment. Copyright © 2016 Pearson Education, Inc. Gyorgyi Dano Internal data Internal databases: are collections of consumer and market information obtained from data sources within the company network. 48 What is Marketing Research? Marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization. Copyright © 2016 Pearson Education, Inc. Gyorgyi Dano Marketing Research Process 49 Exploratory research: Marketing research to gather preliminary information that will help define problems and suggest hypotheses. Descriptive research: Marketing research to better describe marketing problems, situations, or markets, such as the market potential for a product or the demographics and attitudes of consumers. Causal research: Marketing research to test hypotheses about cause-and-effect relationships. Györgyi Danó Research Objectives 50 Developing the Research Plan Management problem Research objectives How the results will help management decisions Budget Copyright © 2016 Pearson Education, Inc. Györgyi Danó Information needed 51 Secondary data Gyorgyi Dano Information that already exists somewhere, having been collected for another purpose. 52 Secondary data Lower cost Relevant Obtained quickly Accurate Cannot collect otherwise Current Impartial Gyorgyi Dano Advantages Disadvantages - data may not be Copyright © 2016 Pearson Education, Inc. Gyorgyi Dano Primary data Information collected for the specific purpose at hand. Observation observing relevant people, actions, and situations Survey asking people questions about their knowledge, attitudes, preferences, and buying behavior Experiment selecting matched groups of subjects, giving them different treatments, controlling related factors, and checking for differences in group responses Gyorgyi Dano Research Approaches 54 Qualitative vs. Quantitative Research Research questions Quantitative Qualitative Blythe (2006:239) Gyorgyi Dano What? When? Where? Why? Who? How? How many? 55 56 Flexibility Poor Quantity of data that can be Good collected Telephon e Personal Online Good Fair Excellent Excellent Good Good Control of interviewer effects Control of sample Excellent Fair Poor Fair Fair Excellent Good Excellent Speed of data collection Poor Excellent Good Excellent Response rate Poor Poor Good Good Cost Good Fair Poor Excellent Gyorgyi Dano Mail Copyright © 2016 Pearson Education, Inc. Contact Methods 57 Sample: A segment • Sampling unit of the population • Sample size selected for • Sampling marketing research procedure to represent the population as a whole. Gyorgyi Dano Sample 58 Research Instruments Gyorgyi Dano • Questionnaires • Mechanical devices 59 Implementing the Research Plan • Collecting the information • Processing the information • Analyzing the information • Interpret findings • Draw conclusions • Report to management Györgyi Danó Interpreting and Reporting Findings Designing a customer-driven marketing strategy Select customer to serve Decide on a value proposition Segmentation Divide the total market into smaller segments Differentiation Differentiate the market offering to create superior customer value Create value for targeted customer Positioning Position the market offering in the minds of target customers Györgyi Danó How will we serve them? Which customers will we serve? Targeting Select the segment or segments to enter 60 61 Market segmentation Györgyi Danó Dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate products or marketing mixes. 62 Marketers rarely limit their segmentation analysis to only one or a few variables. Rather, they often use multiple segmentation bases in an effort to identify smaller, better defined target groups. Gyorgyi Dano Multiple Segmentation Bases for segmenting consumer markets nations, regions, states, counties, cities, etc. Psychographic segmentation social class, values, lifestyles, personality Demographic segmentation age, gender, generation, family size, family life cycle, income, occupation, education, religion, race, and nationality, etc. Behavioral segmentation knowledge, attitudes, uses, or responses to a product (occasions, benefits sought, user status, usage rate, loyalty status) Györgyi Danó Geographic segmentation 63 64 Measurable: The size, purchasing power, and profiles of the segments can be measured. Accessible: The market segments can be effectively reached and served. Substantial: The market segments are large or profitable enough to serve. Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments. Actionable: Effective programs can be designed for attracting and serving the segments. Györgyi Danó Effectiveness of the Segmentation 65 Market Targeting A company should only enter segments in which it can create superior customer value and gain advantages over its competitors. Györgyi Danó Target market consists of a set of buyers who shares common needs or characteristics that the company decides to serve. • • • Selecting segments that have the right size and growth characteristics is a relative matter. The largest, fastest-growing segments are not always the most attractive ones for every company. Smaller companies may target segments that are smaller and less attractive, in an absolute sense, but that are potentially more profitable for them. Structural factors that affect long-run segment attractiveness include strong and aggressive competitors, new entrants, substitute products, power of buyers relative to sellers, and powerful suppliers who can control prices, quality, or quantity of ordered goods and services. Some attractive segments can be dismissed quickly because they do not mesh with the company’s long-run objectives. Or the company may lack the skills and resources needed to succeed in an attractive segment. Györgyi Danó Evaluating Market Segments 66 67 Target Marketing Strategies Targeting narrowly Copyright © 2016 Pearson Education, Inc. Györgyi Danó Targeting broadly 68 Company marketing mix Market Model T Ford, „one size fits all” Györgyi Danó Undifferentiated marketing targets the whole market with one offer. • mass marketing (using the same marketing mix for all consumers) • focuses on common needs rather than what’s different 69 Company marketing mix 1 Company marketing mix 2 Company marketing mix 3 Segment 1 Segment 2 Segment 3 Györgyi Danó Differentiated marketing targets several different market segments and designs separate offers for each. • goal is to achieve higher sales and stronger position • more expensive than undifferentiated marketing 70 Concentrated marketing (or niche marketing) targets a small share of a large market. • limited company resources • knowledge of the market • more effective and efficient Segment 1 Segment 2 Segment 3 Györgyi Danó Company marketing mix Györgyi Danó Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups. (cities, neighborhoods, stores) Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers. Also known as: one-to-one marketing, mass customization, markets-of-one marketing. 71 Differentiation and Positioning 72 • Perceptions • Impressions • Feelings Györgyi Danó Product position is the way the product is defined by consumers on important attributes - the place the product occupies in consumers’ minds relative to competing products. • Identifying a set of possible competitive advantages to build a position • Choosing the right competitive advantages • Selecting an overall positioning strategy • Communicating and delivering the chosen position to the market Product Services Channels People Image Györgyi Danó Choosing a Differentiation and Positioning Strategy 73 Through product differentiation, brands can be differentiated on features, performance, or style and design., Subway differentiates itself as the healthy fast-food choice. Some companies gain services differentiation through speedy, convenient, or careful delivery. For example, First Convenience Bank of Texas offers “Real Hours for Real People.” It is open seven days a week, including evenings. Firms that practice channel differentiation gain competitive advantage through the way they design their channel’s coverage, expertise, and performance. Amazon.com for example, set themselves apart with their smooth-functioning direct channels. Companies can also gain a strong competitive advantage through people differentiation - hiring and training better people than their competitors do. Even when competing offers look the same, buyers may perceive a difference based on company or brand image differentiation. The chosen symbols, characters, and other image elements a brand chooses must be communicated through advertising that conveys the company’s or brand’s personality. Györgyi Danó 74 Value Proposition 75 Györgyi Danó The brand’s full positioning is called its value proposition - the full mix of benefits on which the brand is positioned. நன்றி Györgyi Danó 76