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Course No. 6 Marketing and Service Management Prof. Dr. Charles Pahud de Mortanges Bernd Michael Prof. Dr. Bernd Günter DBS/UMBS Joint MBA Program 2007 DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 2 Course No. 6 „Marketing and Service Management“ Outline of Contents 1. Understanding marketing 2. Competitive Advantage and Customer Orientation 3. Elements of a Marketing Plan 3.1 The Role of Market Information and Customer Analysis 3.2 Marketing Objectives and Marketing Strategies 3.3 Market Segmentation 3.4 Branding 3.5 The Marketing Mix: 4 Traditional “Big” Instruments and Four “Small” Instruments 3.6 Developing & Managing Products and Services 3.7 Developing Price Strategies & Programs 3.8 Designing & Managing Marketing Channels 3.9 Marketing Communication 3.10 Managing The Sales Force Note: Teachers are 1 – 3.3 Prof. Dr. Bernd Günter (Feb 10, Feb 12, and Feb 13) 3.4 / 3.9 Bernd Michael, Strategic Advisor, Grey Global Group Middle Europe (Feb 26, Feb 27 ) 3.5 – 3.10 Prof. Dr. Charles Pahud de Mortanges (Feb 24 double session in Maastricht; Mar 3) All sessions to be held in Düsseldorf except February 24 in Maastricht. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 3 Marketing is regarded • as an intra-organizational function of a company (organization). Within this orientation it can be positioned either as a planning and merchandizing support for sales department (“Marketing-Services”) or as the total function of sales and distribution. • as a holistic management approach of a company (organization), which focuses on creating and implementing competitive advantages through customer orientation. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 4 Marketing Triangle customer supplier competitor Source: Plinke, W. (2000): Grundkonzeption des industriellen Marketing-Managements, in: Kleinaltenkamp, M./Plinke, W. (eds..): Technischer Vertrieb. Grundlagen, 2nd ed., Berlin., p. 44 and 56 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 5 Basic Elements of Marketing business relationships, market share, total customer equity customer retention customer satisfaction competitive advantages customer orientation / market orientation Note: This slide is incomplete and will be completed during the session! DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 6 Marketing – Competitive Advantage - Customer Orientation • A company can only be successful if it achieves competitive advantages. Therefore specialized skills have be to be transformed in customer advantages. • A competitive advantage can only be established if from a customer point of view a company offers advantages compared to alternatives which have been taken into consideration and are evaluated by customers. Marketing aims for: the identification, market implementation, and development of competitive advantages. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 7 Marketing – Competitive Advantage - Customer Orientation Marketing Definition: Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. (Definition of the American Marketing Association, in: Marketing News, September 15, 2004, p. 1) Marketing means management of competitive advantages through customer orientation! DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 8 Aspects of Marketing • • • • • Marketing deals with decision problems (planning, implementation and controlling). Marketing is based on analyzing the company’s microenvironment (aspect of information). Marketing includes using marketing instruments (targeted influence of the market; aspect of action). Marketing has an external (e.g. towards sourcing and selling markets) and internal orientation (intra-organizational coordination of market-oriented activities). Marketing means a consequent orientation of all company’s activities towards the market (aspect of philosophy). Marketing is a comprehensive corporate management approach. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 9 Positioning, competitive advantage and USP • Competitive advantages… … are real customer advantages from a subjective customer point of view or from the perspective of whole target groups (market segments) • A USP (Unique Selling Proposition) … … means competitive advantage taken from a selling company’s point of view. A USP can be a possible position of uniqueness. • About „Value added“ … … is spoken in combination with competitive advantage and/or USP, if additional value/benefit is created for the customer through a superior position compared to competitors. • Positioning … …an offer and/or a company in the market competition indicates, where a company together with its offers wants to be or has already been settled in the competitive environment. Furthermore positioning includes the current setting especially from a customers and competitors point of view. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 10 Definition of Competitive Advantage (Plinke) A company’s capability to be in a sustainable way … • more effective (to create more value/benefit for customers = customer advantage) and/or • more efficient (to have lower total production costs or to be faster = seller advantage) than its present or potential competitors. Source: Plinke, W. (2000): Grundlagen des Marktprozesses, in: Kleinaltenkamp, M./Plinke, W. (eds.): Technischer Vertrieb. Grundlagen, 2nd ed., Berlin, p. 89 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 11 4 Types of Competitive Advantages (customer advantages; seen from a customer‘s point of view) • Value/Benefit from the product or service itself (“better”) • Cost advantage for the customer (“more economical”) • Time advantage (“faster”) • Reliability advantage (“Promises will be kept with a higher likelihood”; “Verlässlichkeitsvorteil”) DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 12 The 4 Competitive Advantages (Customer Advantages) contain following issues: • Competitive Advantage 1 (Value/Benefit from the product/service itself ): The offering, the subject of contract and/or bartering object contain superior qualitative attributes. • Competitive Advantage 2 (Total Cost of Ownership Advantage): Customers benefit in return of the subject of contract and/or bartering object through: • lower cost of development • lower cost of purchase (incl. auxiliary cost of acquisition) • lower current costs (maintenance, operation ) • lower disposal costs • Competitive Advantage 3 (Time Advantage): The offer (subject of contract and/or bartering object ) is faster available for customers. • Competitive Advantage 4 (Reliability Advantage, “Verlässlichkeitsvorteil”): Promises will be kept with a higher likelihood by the company compared to competitors. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 13 Requirements for Competitive Advantages 1. Seller company related capabilities or resources 2. Important for customers 3. Noticeable and distinguishable by customers 4. Superior compared to relevant competitors 5. Advantages have to be sustainable and defendable Source: Plinke, W. (2000): Grundlagen des Marktprozesses, in: Kleinaltenkamp, M./Plinke, W. (eds.): Technischer Vertrieb. Grundlagen, 2nd ed., Berlin, pp. 90-91 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 14 Checklist for Potential Competitive Advantages • Are the assumed competitive advantages provable (true)? • Can the competitive advantages be measured (operationable)? • Have we agreed in our company about the important competitive advantages? • Relating to a competitive advantage – is our company no. 1 in the market? • Is our catalogue of competitive advantages completed ? • Maybe our list is too comprehensive and it is impossible to work through or therefore a diffused company profile has been created? • Are the assumed advantages relevant competitive advantages? • The critical question: Is the proposed list of competitive advantages seen from the customers’ point of view? DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 15 Customer Orientation of a Company Customer orientation means targeting the management system on following aspects, including a realization through division of labor in all functions of the company: • Early and complete perception of customers’ (conscious and/or unconscious) expectations, • realization and translation of expectations into a profile of program and performance and • fulfillment of customer expectations. Source: Plinke, W. (2000): Grundlagen des Marktprozesses, in: Kleinaltenkamp, M./Plinke, W. (eds.): Technischer Vertrieb. Grundlagen, 2nd ed., Berlin, pp. 116-130 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 16 Customer Orientation of executives and employees Customer orientation means an attitude of executives and employees within the company towards • their own work, • the results of their work as well as • towards the collaboration with other persons and departments within the company, which has to be completely orientated towards the fulfillment of customer expectations. Furthermore customer orientation includes an acceleration of a role, which is assumed towards customers. This is a problem solution serving role (problem solution as a service). Source: Plinke, W. (2000): Grundlagen des Marktprozesses, in: Kleinaltenkamp, M./Plinke, W. (eds.): Technischer Vertrieb. Grundlagen, 2nd ed., Berlin, pp. 116-130 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 17 Examples for Different Definitions of Quality “Quality is defined as the totally of features and characteristic of a product or service that bear on its ability to satisfy stated or implied needs.” Source: ISO Standard 8402. “Quality is fitness for use.” Source: Juran, J. (1974, ed.): Quality Control Handbook, New York, Section 2-2. “Quality means meeting contracted requirements aiming at sustainable customer satisfaction.” Source: Zink, K. J. (1992): Total Quality Management, in: Zink, K. J. (ed.): Qualität als Managementaufgabe, Landsberg/Lech, p. 18 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 18 Marketing means to search for competitive advantages, to implement, to communicate, and to develop them. Marketing includes • a mindset, which is been affected by a competitive advantage based thinking and customer orientation, • the application of instruments (e.g. customer analysis, segmentation, advertising, etc.), • the intra-ogranizational coordination of all supplier involved parties to achieve competitive advantages and customer satisfaction. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 19 The intra-oganizational Integration Task of Marketing supplier customer Market-oriented corporate management Procurement R&D Operations Sales External orientation: What satisfies customers? Intra-organizational collaboration and orientation: How we can satisfy customers? Source: Plinke, W. (2000): Grundlagen des Marktprozesses, in: Kleinaltenkamp, M./Plinke, W. (eds.): Technischer Vertrieb. Grundlagen, 2nd ed., Berlin, pp. 156-158 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 20 Elements of a Marketing Plan (I) definition of the relevant market and corporate mission information collecting and analysis of the situation analysis of strengths and weaknesses identification of competitive advantages (positioning) differentiation of competitive advantages through target groups (market segmentation) DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 21 Elements of a Marketing Plan (II) strategy development decisions of/agreement on objectives planning the application of marketing instruments (marketing mix) preparation of realization (cooperation, profitability analysis, tests) realization (implementation) feedback (monitoring and adaptation/further development) DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 22 Fundamental Information for Sales Strategic Decisions Fundamental information for sales strategic decisions includes: • market information = customer acceptance = behavior of competitors = development of environment as well as • internal information about the company = objectives = development of costs = R&D, operation, sales & distribution = pricing and conditions = (planned) activities = human resource management. Internal information has to be communicated to sales and distribution and maybe to customers. External information has to be distributed to the relevant functional areas within the company (filtering problem). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 23 Market Research internal data secondary research external data market research interview external data observation experiment primary research interview internal data observation experiment DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 24 Customer Analysis Contents of customer information systems in business-to-business-Marketing • quantitative data: - • current customer data potential customer data customer contribution margin customer lifetime value qualitative data: - DBS UMBS 2007 buying motives requirements of customers information on buying phase and buyclass (buying situation) promotors / opponents behavior based interaction of participants: information behavior, communication flow, reliance, negotiation behavior procurement specific characteristics of the buying organization „rules of the game” for procurement and delivery within a company environment based influences qualitative parameters of customer value Marketing and Service Management Univ.-Prof. Dr. Günter 25 Defining the Business customer function customer groups alternative technologies Source: Abell, D. F. (1980): Defining the Business, Englewood Cliffs, p. 30. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 26 Basic Positioning in the Clothing Market (exemplary demonstration) price/quality high C1 C3 product design timeless C2 product design trendy C4 C5 price/quality low Unique position (meanwhile successfully taken by H&M, Zara) A1 - A5 = company (brands) 1 – 5 Note: The figure concerns a market segment of the clothing market. It can be segmented more specifically for example in special target groups (sex, age, income and/or customer attitude, lifestyle, etc.) Source: Becker, J. (2006): Marketing-Konzeption, 8th ed., München, p. 249 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 27 Strategy Strategies define the relevant framework and path („How we can get there?“) to ensure that all operative (tactical) instruments are used for fitting the objectives. Marketing Strategies • • • • • • consist of a package of measures, are target-oriented (achievement of aspired market position), include a well-defined direction of impact, determine principles of behavior for those involved, have a predominant long term character, and have a strong customer, competitor, and (micro) environment orientation beside focusing on objectives. Source: Becker, J. (2006): Marketing-Konzeption, 8th ed., München, pp. 140-142 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 28 Relations between Marketing Objectives, Marketing Strategies, and Marketing Mix In general objectives describe preferred destinations or states. Which leads to the question of “What we want to do?” and/or “Where we want to go?”. The question of “How?” determines the path we have to follow according to our strategy. The marketing mix determines the means of transportation following a defined path to reach the preferred destinations. Whereas strategies structure the framework of activities, the mix determines the process of activities. Therefore the marketing mix can be understood as a tactical element of strategy and/or as their operationalization. 1. 2. 3. Marketing Objectives Marketing Strategies Marketing Mix preferred destinations path means of transportation timetable in terms of operational instructions (= Marketing Plan) Source: Becker, J. (2006): Marketing-Konzeption, 8th ed., München, p. 147 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 29 Marketing Strategy Grid (Becker et al.) Levels of Strategies Content of Strategic Decisions Basic Strategy Options 1. Market Activity Strategies Design of product / market combinations Present and new products in present or new markets (Ansoff matrix) 2. Branding Strategies Design of brand appearance Branding or no name 3. Market Stimulating Strategies Design of the way of stimulating demand Quality competition or price competition 4. Market Covering Strategies Determining type and degree of marketing differentiation Undifferentiated (mass market) or differentiated marketing (market segmentation) 5. Market Area Strategies Determining geographic area of marketing activities National or international sales policy 6. Network / Cooperation Strategies Defining form and direction of cooperation or single-company strategy Single-company strategies or cooperation (network) strategies 7. Customer Strategies Treatment of customer and transaction Relationship strategies (customer retention) or transaction strategies Source: Becker, J. (2006): Marketing-Konzeption, 8th ed., München, p. 148 (Level 2, 6, 7 added by B. Günter; translated by Jörg Dauner/Bernd Günter). . DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 30 The Ansoff Matrix Market present new present Market Penetration Market Development new Product Development Diversification Product/ Service Source: Ansoff, H. I. (1966): Managementstrategie, München, p. 132 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 31 Market Stimulating Strategies – Basic Options Preference Strategy All marketing activities have to be orientated towards the effort of increasing offer-related benefits for customers. The quality of the products/services has to be increased and sustainable customer preferences have to be built up by using mainly non-price-related marketing instruments. Price Quantity Strategy All activities have to be concentrated towards the effort of offering an especially low priced product/service expecting enlarged selling quantities. Therefore the reduction of costs have to be an ongoing and sustainable process. Source: Becker, J. (2006): Marketing-Konzeption, 8th ed., München, pp. 179-181 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 32 Market Differentiation Strategies Level of Differentiation undifferentiated differentiated 1 undifferentiated Marketing 3 differentiated Marketing 2 concentrated Marketing 4 differentiated Marketing (single segments) Market Coverage completely partly Source: Meffert, H. (2000): Marketing, 9th ed., Wiesbaden, p. 217 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 33 Market Covering Strategies – a Comparison evaluation of Mass Market Strategy (“shotgun approach“) Segmentation Strategy (“sniper approach“) advantages • cost advantage through mass production • coverage of a wide variety of potential customers • standardized marketing mix • marketing related organizational effort is lower • fulfillment of target group differentiated customer preferences • development of an above-average price range • possibility of controlling market segments according to target group oriented aspects • possibility to replace partly price competition by quality competition disadvantage • maybe customer preferences are not totally met according to market conditions • limited price range („monopolistic area” is comparatively low) • limited possibilities of targeted market supervision • risk of price competition • increased complicatedness (increase in cost) of marketing instruments used • if necessary: abandonment of mass production (and corresponding cost advantages) • partly limited stability of market segments • high requirement of marketing know-how and appropriate marketing organization final evaluation ROI depends on a low cost position primarily due to the price competition ROI depends on above-average prices primarily due to a target group specific satisfaction Source: Becker, J. (2006): Marketing-Konzeption, 8th ed., München, p. 290 (translated by Jörg Dauner/Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 34 Market Segmentation – Definition and Objectives • • • aspect of information: – Market segmentation means to cut a given or imagined market up into different buying groups who respond to selling activities more homogenous than the entire market, … aspect of decision: – ...the following selection of market segments which have to be targeted and ... aspect of action: – the orientation of the marketing mix towards the particular market segments. The overall objective of using a market segmentation strategy is to develop for (a) selected (group of) buyers targeted offers in order to create customer preferences and realize competitive advantages (customer advantages). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 35 Advantages of Market Segmentation 1. 2. 3. 4. 5. Special target group preference effects can be utilized. Stronger customer loyalty can be achieved in the long term. Autonomous areas of pricing can be enlarged. An increase in turnover may be realized. Segmentation combined with a focused market coverage can reduce costs compared to standardization. 6. Advertisement can be more customer-focused. 7. It is easier to deepen distinctiveness and to achieve brand recognition in the market 8. Lower risk of market entry of competitors into a specialized market segments compared to the entire market. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 36 Disadvantages of Market Segmentation 1. Market segmentation can be an expensive strategy. 2. Market segmentation requires informational and methodically specialized know-how and skills. 3. Market segmentation can cause an increased factor inflexibility (production of specialized goods). 4. Some market segments are not sustainable enough, i.e. demand volume is too low. 5. Segments can move or shift over time and specific preferences of buyer groups can change faster than preferences of the entire market. Therefore a continuous monitoring of market segments is necessary. 6. Higher risk of losing a specialized market segment if a competitor enters the market compared to the entire market. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 37 8 Marketing Instruments – The Marketing Mix Product, Service, and Program Policy Timing Financing the Customer Distribution Channel Decisions Contracting Pricing Quantity Decisions Marketing Communication DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 38 Contracting In a marketing and selling perspective, contracting decisions include all instruments and activities of a company aimed at reaching marketing objectives by designing and offering terms of contracts, clauses, types of contracts and agreements in a selling and buying context. Major issues of contracting decisions are: - Which type of contract should be drafted? - Should a standard contract or an individualized agreement be used? - How flexible or rigid should a contract/agreement be designed? - Which elements must be included in a contract (e.g. due to legal obligations); which terms are voluntary elements? - How does the contract/agreement deal with risks? Contracting (“Kontrahierungspolitik”; “Vertragspolitik”) can be regarded as a marketing instrument as it is suitable for attracting customers or for keeping them at distance. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 39 Financing the Customer • Financing the customer (“Absatzfinanzierungspolitik”) includes every activity of a company to stimulate demand by offering non-cash terms and dates of payment, purchase on credit (given by or arranged by the supplier), or leasing. • Objective of financing the customer is to increase the sales volume by attracting new customers and intensifying demand by customer retention. • A supplier's credit to the customer may be connected with the purchase of goods and services from that vendor company or independent from that. • In the case of a leasing the customer does not pay the purchase price of a product but just a down payment and a monthly leasing instalment, usually over a period of several years. At the end of the leasing period there might be the possibility to return the leasing object or to buy it. • Financing the Customer is a most common marketing instrument e.g. in selling cars. It is supposed to be a decisive marketing instrument in marketing large projects internationally. • Financing the customer can be regarded as a marketing instrument as it is suitable for attracting customers or to keep them at distance. Source: Meffert, H.(2000): Marketing, 9th ed., Wiesbaden, pp. 589-590 (translated and enlarged by Bernd Günter). DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 40 Quantity Decisions (I) In a marketing and selling context quantity decisions (“Mengenpolitik”) include all activities and measures a company takes that aim at reaching marketing goals by controlling (increasing, maintaining, decreasing) the quantity offered and to be sold, with respect to a sales unit or the entire quantity to be sold. Controlling quantities of products and services offered is strongly interdependent with product/program policy, pricing, and timing decisions. Decisions concerning total quantity to be (produced and) offered during a period depend e.g. from marketing strategies, segment volume, capacities etc. Decisions on a sales unit quantity are strongly interdependent with program policy and especially with pricing, but also with the interests of distribution channels. Quantity decisions can be regarded as a marketing instrument as they are suitable for attracting customers or to keep them at distance. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 41 Quantity Decisions (II) Major issues in of quantity decisions (volume decisions; “Mengenpolitik”) are: - Which quantity should be treated as a sales unit (lot)? - Which quantity should be offered per period, e.g. per month, year, or campaign? - Which quantity should be offered or contracted per order/contract? - Which quantity should be offered per customer, group of customers, segment? - Should there be a maximum or minimum quantity or quota? - Are offered quantities produced /sold by the company alone or on a collaborative basis with cooperation partners? - What could be the range of volumes/quantities offered and/or demanded, and how should risks be handled stemming from deviations of planning? DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter 42 Timing In a marketing and selling context, timing decisions include all instruments and activities of a company aimed at reaching marketing objectives by planning and designing the time element of potentials/facilities, processes and products/performances. Major issues of timing decisions are: - At which time should a (new) product/service be introduced to the market? - When should a company approach a customer, negotiate, contract with him? - Product delivery time(s) - At what time should a service be offered and delivered? - When should a product or a service be replaced by a follow-up? Timing (“Zeitpolitik”) can be regarded as a marketing instrument as it is suitable for attracting customers or for keeping them at distance. DBS UMBS 2007 Marketing and Service Management Univ.-Prof. Dr. Günter