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Tuesday afternoon
Marketing
What is Marketing?
• Marketing -- 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’s
official definition of marketing
Focus of Contemporary Marketing
• Marketing today involves helping the buyer buy
through:
- Websites that help buyers find the best price,
identify product features, and question sellers.
– Blogs and social networking sites that cultivate
consumer relationships.
The Four Eras of Marketing
The Customer Relationship Era
• Customer Relationship Management (CRM) -Learning as much as you can about customers and
doing what you can to satisfy or exceed their
expectations.
• Organizations seek to enhance customer
satisfaction building long-term relationships.
• Disney
• Celebration
The Value of Customer Relationships
• On average, it costs over 10 TIMES more to
acquire a new customer versus retain an
existing one
• A 5% gain in customer retention can result in
an 80% gain in profits.
MASS MARKETING vs.
RELATIONSHIP MARKETING
• Mass Marketing -- Developing products and
promotions to please large groups of people.
• Relationship Marketing-- Rejects the idea of mass
production and focuses toward custom-made goods
and services for customers.
KEYS to SUCCESSFUL
RELATIONSHIP MARKETING
• Effective relationship marketing is built on:
• Open communication
• Consistently reliable service
• Staying in contact with customers
• Trust, honesty, and ethical behavior
• Showing that you truly care
The Marketing Environment
The Four P’s of Marketing
•
•
•
•
Product
Pricing
Place (Distribution)
Promotion
Product
DEVELOPING a
TOTAL PRODUCT
• Total Product Offer -- Everything
consumers evaluate when deciding
whether to buy something
• Products are evaluated on many different
dimensions, both tangible and intangible.
• Marketers must think like and talk to consumers to
find out what’s important.
POTENTIAL COMPONENTS
of a TOTAL PRODUCT OFFER
Product Mix and Product Line
• Product Mix -- The combination of all product lines
offered by a manufacturer or service provider.
• Product Line -- A group of products that are
physically similar or intended for a similar market.
Disney’s Product Mix and Product Lines
Types of Consumer Products
Convenience
Product
A relatively inexpensive item that merits little
shopping effort. (candy)
Shopping
Product
A product that requires comparison shopping,
because it is usually more expensive and found
in fewer stores. (appliances)
Specialty
Product
A particular item that consumers
search extensively for and are reluctant to
accept substitutes. (Lamborghini)
Unsought
Product
Products the consumer is not knowledgeable
about or aware of, may even have a negative
interest. (car-towing service)
The New Product Development Process
The Four Stages of the Product Life Cycle
• Product Life Cycle -- A theoretical look at what
happens to sales and profits for a product over time.
• Product Life Cycle Stages:
1. Introduction
2. Growth
3. Maturity
4. Decline
SALES and PROFITS DURING
the PRODUCT LIFE CYCLE
Marketing Strategies for PLC
Introductory
Growth
Maturity
Decline
Product
Limited offerings,
frequent changes
More offerings, product
is modified
Many models, often
customized for niche
markets
Models are phased
out, eliminated
Distribution
Limited, few outlets
More outlets
Wide distribution
Distribution
decreases
Price
High
Prices begin to fall
Priced continue to
decrease
Prices fall to low
levels
Promotion
Focused on product
awareness,
information, strong
use of personal
selling
Brand focused to
differentiate from
increased competition,
advertising increases
Promotions more
focused on price
(coupons, rebates,
etc.) and advertising
Promotion stops
Sales
Low
Rapidly increasing
Max. sales reached
Declining
Costs
High
Decreasing
Low (econ. of scale)
Low
Profits
(Loss)
Break even, low profits
High profits
Declining/gone
Customers
Innovators
Early Adopters, early
majority
Early Majority, Late
Majority
Laggards
Competitors
Few
Increasing competition
Many, entrants
decreasing
Few, most leave
market
Differentiating Products
• Product Differentiation -- The creation of real or
perceived product differences.
• Marketers use a mix of pricing, advertising and
packaging to create different images.
SOME KEY FUNCTIONS of
PACKAGING
• To attract buyers’ attention
• Protect the goods inside and be tamperproof
• Describe and provide information about the
product
• Explain the product’s benefits
• Provide warranty information and warnings
• Give an indication of price, value, and uses
Understanding Branding
• Brand -- Name, symbol, or design that identifies the
goods or services and distinguishes them from
competitors’ offerings.
• Brand Equity – The combination of factors
(awareness, loyalty, perceived quality, images, and
emotions) that people associate with a brand name.
How much $$ is the brand name worth??
• Brand Loyalty -- The degree to which consumers
are satisfied and are committed to further purchases.
Building Brand Awareness
• Brand Awareness -- How quickly or easily a given
brand name comes to mind when someone mentions
a product category.
• Consumers reach a point of brand preference
when they prefer one brand over another. Coke
over Pepsi
• When consumers reach brand insistence, they
will not accept substitute brands. Pizza at the
shore – only from Mack and Manco’s!
Brand Associations
• Brand Association -- Linking a brand to other
favorable images, like celebrities or a geographic area.
Tiger Woods??
• Brand Manager -- Person responsible for a
particular brand and handles all the elements of the
brand’s marketing mix.
Price
Pricing Objectives
• Achieving a target return on investment or profit
• Building traffic
• Achieving greater market share
• Creating an image
• Furthering social objectives both short-run and longrun
Pricing Strategies
• Cost-based pricing measures cost of producing a
product including materials, labor, and overhead.
• Target Costing -- Making the final price of a product
an input in the product development process by
estimating the selling price consumers will pay.
example
• Competition-Based Pricing -- A strategy based on
what the competition is charging for its products.
Using Breakeven Analysis
• Break-Even Analysis -- The process used to determine
profitability at various levels of sales. The break-even point
is where revenues equals cost.
• Total Fixed Costs -- All costs that remain the same no
matter how much is produced or sold.
• Variable Costs -- Costs that change according to the
level of production.
• Example
Breakeven Example
•
•
•
•
•
•
Selling price = $9 per unit
Variable costs = $5 per unit
Fixed Costs = $32,000
How many units must be sold to breakeven?
Units = FC/(SP/unit-VC/unit)
$32,000/($9-5) = 8,000 units
Pricing Alternatives
•
Skimming Price Strategy -- Pricing new products high to recover costs and make
high profits while competition is limited.
•
Penetration Price Strategy -- Pricing products low with the hope of attracting more
buyers and discouraging other companies from competing in the market.
•
Everyday Low Pricing (EDLP) -- Setting prices lower than competitors with no
special sales.
•
High-Low Pricing -- Using regular prices that are higher than EDLP except during
special sales when they are lower.
•
Psychological Pricing -- Pricing products at price points that make a product seem
less expensive than it is. $47 or $1.99
Place
Marketing Intermediaries
• Marketing Intermediaries -Organizations that assist in moving goods
and services from businesses to
businesses (B2B) and from businesses to
consumers (B2C).
• They are called intermediaries because
they’re in the middle of a series of firms
that distribute goods.
Why Use Marketing Intermediaries?
• Intermediaries perform marketing tasks
faster and cheaper than most
manufacturers could provide them.
• Marketing intermediaries make markets
more efficient by reducing transactions
and contacts.
Types of Marketing Intermediaries
• Agents and Brokers -- Intermediaries who
bring buyers and sellers together and assist
in negotiating an exchange but do not take
title to the goods they offer.
• Wholesaler -- An intermediary that sells
products to other organizations such as
retailers, manufacturers, and hospitals.
• Retailer -- An organization that sells products
to ultimate customers.
Channels of Distribution
• A group of marketing intermediaries that
join together to transport and store goods
from producers to consumers.
Examples of Channels of Distribution
Distribution’s Effect on your Food Dollar
Key Facts about Intermediaries
• Marketing intermediaries can be eliminated but
their activities can’t.
• Intermediaries perform marketing functions faster
and cheaper than other organizations can.
• Marketing intermediaries add costs to products but
they’re generally offset by the values they provide.
Intermediaries Help
Overcome Discrepancies
1.Quantity: amount produced and amount end
user wants to buy
2.Assortment: may not have the variety of all
products a consumer wishes to buy
3.Time: product is produced at a different time
than the customer wants
4.Space: product is produced in a different place
than the consumer wants to buy
Marketing Channel Members Add
Value
Consumer
Nabisco
Post
Kellogg’s
Safeway
Grocery
Store
•Quantity
•Assortment
•Time
•Space
Consumer
Consumer
How Intermediaries Enhance Efficiency
Types of Retail Stores
Types
Examples
Department Store
Sears, JC Penney, Nordstom
Discount Store
Wal-Mart, Target
Supermarket
Safeway, Kroger, Albertson’s
Warehouse Club
Costco, Sam’s Club
Convenience Store
7-Eleven
Category Killer
Toys-R-Us, Bass Pro Shops, Office
Depot
Outlet Store
Nordstrom Rack, TJ Maxx, Nike
Outlet
Specialty Store
Jewelry store, shoe stores, bicycle
shops
Non-store Retailing
• Electronic Retailing -- Selling goods and services
to ultimate consumers over the Internet.
• Telemarketing -- The sale of goods and services via
the telephone.
• Vending machines, kiosks, and carts dispense
convenience goods when consumers deposit
sufficient funds.
Non-store Retailing, 2
•
Direct Selling -- Selling goods and services to customers in their homes or workplaces.
Mary Kay Cosmetics
•
Multilevel marketing uses salespeople who work as independent contractors.
•
Direct Marketing -- Any activity that directly links manufacturers or intermediaries with
ultimate customers. Direct marketing is a sub-discipline and type of marketing. There are
two main definitional characteristics which distinguish it from other types of marketing.
The first is that it attempts to send its messages directly to consumers, without the use
of intervening media. This involves commercial communication (direct mail, e-mail,
telemarketing) with consumers or businesses, usually unsolicited. The second
characteristic is that it is focused on driving a specific "call-to-action." This aspect of
direct marketing involves an emphasis on trackable, measurable positive (but not
negative) responses from consumers (known simply as "response" in the industry)
regardless of medium.
Supply Chain
• Supply Chain -- All the linked activities various
organizations must perform to move goods and
services from the source of raw materials to ultimate
consumers.
• Supply Chain Management -- The process of
managing the movement of raw materials, parts, work
in progress, finished goods, and related information
through all the organizations in the supply chain.
The Supply Chain
Logistics
• Logistics -- The planning, implementing and
controlling of the physical flow of material, final goods
and related information from points of origin to points
of consumption.
• Firms may outsource to companies specializing in
trade compliance to determine what is needed to
market products to global customers.
Logistics Applications
• Inbound Logistics -- Brings raw materials,
packaging, other goods and services and
information from suppliers to producers.
• Materials Handling -- Movement of goods within a
warehouse, from warehouse to the factory floor and from
the factory floor to workstations.
• Outbound Logistics -- Manages the flow of finished
products and information to business buyers and
consumers.
• Reverse Logistics -- Brings goods back to the
manufacturer because of defects or for recycling.
Comparing Transportation Modes
Mode
Cost
Speed
Dependability
Flexibility
Frequency
Reach
Rail
Med.
Slow
Medium
High
Low
High
Trucks
High
Fast
High
Medium
High
Highest
Pipeline
Low
Medium
Highest
Lowest
Highest
Lowest
Ships
Lowest
Slowest
Lowest
Highest
Lowest
Low
Air
Highest
Fastest
Low
Low
Medium
Medium
Breakdown of Distribution Modes
TABLE 1 Domestic and International U.S. Freight Shipments
by Tons and Value for 1998, 2010, 2020.
Mode
Tons
(millions)
2010
2020
Domestic
Air
9
18
Highway 10,439
Rail
1998
1,954
Water
1,082
Total,
Domestic 13,484
1998
Value
(billions $)
2010
2020
26
545
1,308
2,246
14,930
18,130
6,656
12,746
20,241
2,528
2,894
530
848
1,230
1,345
1,487
146
250
358
18,820
22,537
7,876
15,152
24,075
Warehousing
• Storage warehouses hold products for a relatively
long period of time.
• Distribution warehouses are used to gather and
redistribute products such as:
- Package deliveries (FedEx)
Promotion
Promotion
• Communication that informs, persuades, and
reminds potential buyers of a product to
influence an opinion or elicit a response.
Informative Objective
• Increase awareness
• Explain how product works
• Suggest new uses
• Build company image
Persuasion Objective
• Encourage brand switching
• Change customers’ perception of product
attributes
• Influence buying decision
• Persuade customers to call
Reminder Objective
• Remind customers that product
may be needed
• Remind customers where to buy product
• Maintain customer awareness
Promotion in an Organization
• Promotion Mix -- The combination of
promotional tools an organization uses;
the traditional mix includes:
Integrated Marketing Communication
• Integrated Marketing Communication (IMC) -Combines the promotional tools into one
comprehensive strategy. IMC is used to:
- Create a positive brand image.
- Meet the needs of consumers.
- Meet the strategic marketing and promotional goals
of the firm.
Steps in a Promotional Campaign
1. Identify a target market
2. Define objectives
3. Determine a promotional budget
4. Develop a unifying message
5. Implement the plan
6. Evaluate the plan
Advertising
• Advertising -- Paid, non-personal communication
through various media by organizations and
individuals who are in some way indentified in the
message.
ADVERTISING EXPENDITURE by
MEDIA in $ MILLIONS
Rank
Media
Projected
2008
Spending
1
Direct Mail
$63,732
21.6
2
Broadcast TV
48,300
16.4
3
Newspaper
42,147
14.3
4
Cable TV
21,718
7.4
5
Radio
18,635
6.3
6
Yellow Pages
14,705
5.0
7
Consumer Magazine
14,106
4.8
8
Internet
12,722
4.3
Other
58,311
19.8
Total
294,376
100.0
% of Total Ad
Spending
Advertising
• TV advertising is still a dominant media.
• Apple’s 1984 commercial
• Digital Video Recorders (DVRs) challenge TV advertising because
viewers can skip them.
• Product Placement -- Advertisers pay to put their products into TV
shows and movies where the audience will see them.
• The Greatest Movie Ever Sold
Personal Selling
• Personal Selling -- The face-to-face presentation
and promotion of a product, including the
salesperson’s search for new prospects and follow-up
service.
• Salespeople need to listen to customer needs,
help reach a solution and do everything possible
to make the transaction as simple as possible.
Prospecting and Qualifying
• Prospecting -- Researching potential buyers and
choosing those most likely to buy.
• Qualifying -- Making sure customers have a need for
a product, the authority to buy and the willingness to
listen to a sales message.
Steps in the Selling Process
Using Public Relations
• Public Relations (PR) -- Evaluates public attitudes,
changes policies and procedures in response to the
public, and executes a program of action and
information to earn public understanding and
acceptance.
• 3 steps of a good PR program:
1.
Listen to the public
2.
Change policies and procedures
3.
Inform people you’re responsive to their needs
Publicity (not same as PR)
• Publicity -- Any information about an individual,
product or organization that’s distributed to the public
through the media and is not paid for or controlled by
the seller.
• Advantages of Publicity:
• Free
• Reaches people who would not look at an advertisement
• More believable than advertising
Disadvantages of Publicity
• No control over whether the media will use a story
or when they may release it.
• It can be good or bad.
• Once a story has been run, it isn’t likely to run
again.
Sales Promotions
•
Sales Promotion -- The promotional tool that stimulates consumer
purchasing and dealer interest by means of short-term activities.
• Examples of Consumer Promotions:
•
Coupons
•
Demonstrations
•
Sampling
•
Sweepstakes
•
In-store Displays
•
Contests – free t-shirt
Other Promotional Techniques
•
•
Word-of-Mouth Promotion -- People tell others about products they have
purchased.
•
Groupon, LivingSocial
•
Groupon Philadelphia – today’s deal
Viral Marketing -- Paying customers to say positive things on the Internet or setting
up multiple selling schemes whereby consumers get commissions.
•
Top Viral video ads
–
•
Top viral videos of all time
People who promote through viral marketing often receive SWAG which can include free
tickets, shirts, and other merchandise.
Internet-based promotions
• Blog -- Short for web log; an online diary that looks like a
webpage but is easier to create and update by posting text,
photos, videos, or links blogger.com
• Video blogging (vlogging) is the latest – easy to do
• Podcasting -- A way to distribute audio and video
programs via the Internet.
• Email promotions increase brand awareness among
commercial suppliers.
Push versus Pull Strategy
• Pull Strategy
• Push Strategy
Manufacturer
Manufacturer
Retailer demands
product from the
manufacturer
(pulls)
Retailer
Manufacturer
markets to the
consumer through
advertising, sales
promotions, etc.
Retailer
Consumer
demands product
from the retailer
(pulls)
Consumer
Consumer
Manufacturer
offers promotions
to the retailer
(discounts,
increased
personal selling,
etc.)
Retailer passes
along (pushes)
these incentives in
some way to the
consumer
Push and Pull strategies can be used separately or together
Some of my Favorite Commercials
•
•
•
•
•
•
•
•
•
•
•
Jordan 1, Jordan 2
Tiger Woods
Seat Belt
Coke
Google in Paris
Mac 1984
Apple Think Different
P&G
Evian
Sound of Music (publicity for a reality show)
Top 10 viral ads of all time
Marketing Research
• Marketing Research -- Analyzing markets to
determine challenges and opportunities, and finding
the information needed to make good decisions.
• Research is used to identify products consumers
have used in the past and what they want in the
future.
• Research uncovers market trends and attitudes
held by company insiders and stakeholders.
Marketing Research, 2
• Marketing Research helps us:
– Assess Market Potential (Target Market Selection)
– Explore what Product/Service Offerings Customers
Want
– Develop New Products
– Develop Effective Promotional Strategies
– Determine price points
– Measure Existing Customer Satisfaction
– Monitor the External Environment
Four Steps in the Marketing Research Process
1. Defining the problem or opportunity and
determining the present situation.
2. Collecting research data.
3. Analyzing the data.
4. Choosing the best solution and implementing it.
Secondary versus Primary Data
•
Secondary data has been previously collected
by someone else.
•
Primary data is data you collect yourself for
your own study.
Sources of Secondary Data
Internal Corporate Information
Government Agencies
Trade and Industry Associations
Marketing Research Firms
Commercial Publications
News Media
Internet Search Engines/Directories
Advantages of Secondary Data
• Saves time and money
• Aids in determining direction for primary data
collection
• Pinpoints the kinds of people to approach
• Serves as a basis of comparison for other data
Disadvantages of Secondary Data
• May not be on target with the research problem
(info may not be what researcher is exactly looking
for)
• Quality and accuracy of data may pose a problem
–
–
–
–
Who gathered the data?
What method was used?
When was the information gathered?
How were the classifications developed?
Key Benefits of Marketing Research
• Analyze customer needs and satisfaction.
• Analyze current markets and opportunities.
• Analyze the effectiveness of marketing strategies.
• Analyze marketing process and tactics currently
used.
• Analyze the reasons for goal achievement or
failure.
• Using Marketing Data to Predict Life Span
Consumer and B2B Markets
• Consumer Market -- All the individuals or
households that want goods and services for personal
use and have the resources to buy them.
• Business-to-Business (B2B) -- Individuals and
organizations that buy goods and services to use in
production or to sell, rent, or supply to others.
Segmenting the Consumer Market
• Geographic Segmentation -- Dividing the market
by cities, counties, states, or regions.
• Demographic Segmentation -- Dividing the market
by age, income, education, and other demographic
variables.
• Psychographic Segmentation -- Dividing the
market by group values, interests, and opinions.
http://www.claritas.com/MyBestSegments/Default
.jsp
Segmenting, part 2
• Benefit Segmentation -- Dividing the market
according to product benefits the customer prefers.
• For auto company – safety, environment, looks,
speed, handling, size, etc.
• Volume (Usage) Segmentation -- Dividing the
market by the volume of product use.
The CONSUMER DECISION MAKING
PROCESS AND OUTSIDE INFLUENCES