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MARKETING Theory – 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 handwritten 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 learning 1. 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. KEY LEARNING OUTCOMES • 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. KEY LEARNING OUTCOMES • 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 TOOLS BLUNT POWER TOOLS INSTRUMENTS Strategic planning CRM * * Customer segmentation * Core competencies Outsourcing * Scenario & contingency planning * Knowledge Strategic alliances management * Growth strategy* * Supply chain management* Collaborative Mergers & Loyalty management innovation Acquisitions Six sigma* RUDIMENTARY IMPLEMENTS HBR 2006 [12/07 P. 20] SPECIALTY TOOLS RFID* MARKETING Imagination is more important than knowledge. -Albert Einstein 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 AGE Population pyramid 85+ years 80 years 75 years 70 years 65 years 60 years 55 years 50 years Age Working 45 years 40 years 3520-65 years 30 years 25 years 20 years 15 years 10 years 5 years Under 1 year 1.8 • Male 1.3 Female 0.8 0.3 Males 0.3 Percent Females Source: U.S. Census Bureau, Decennial Census 1970 0.8 1.3 1.8 AGE Population by Single Year of Age and Sex: 2000 85+ years 80 years 75 years 70 years 65 years 60 years 55 years 50 years Working Age 45 years 40 years 20-65 35 years 30 years 25 years 20 years 15 years 10 years 5 years Under 1 year 1.8 • Male 1.3 Female 0.8 0.3 Males 0.3 Percent 0.8 Females Source: U.S. Census Bureau, Decennial Census 2000 1.3 1.8 AGE Population by Single Year of Age and Sex: 2030 85+ years 80 years 75 years 70 years 65 years 60 years 55 years 50 years Age Working 45 years 40 years 35 20-65 years 30 years 25 years 20 years 15 years 10 years 5 years Under 1 year 1.8 • Male 1.3 Female 0.8 0.3 Males 0.3 Percent 0.8 Females Source: U.S. Census Bureau, Population Projections 2008 1.3 1.8 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 LEADERSHIP AND TIME HORIZONS EXECUTIVE MANAGEMENT BOARD OF DIRECTORS, CEO, COO, CMO, GROUP VP,… 1-10 years EXECUTIVE, & SENIOR VICE PRESIDENTS 1-5 years VICE PRESIDENTS VP MARKETING (& SALES) MIDDLE MANAGEMENT DIRECTORS DIRECTOR – PRODUCT MANAGEMENT SENIOR MANAGERS GROUP PRODUCT MANAGER MIDDLE MANAGERS LOWER MANAGEMENT SUPERVISION & WORKFORCE 1-3 years 1 year 1 week-1 year PRODUCT MANAGER 1 week-few months JUNIOR MANAGERS Immediate-30 days ENTRY-LEVEL MANAGERS Immediate-30 days SUPERVISORY PERSONNEL & WORK FORCE Immediate 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 DIAGRAM How does an aging population affect the economy of a developed nation? More Automation Demands more workforce and management skills What will they do? ? Labor Shortage Developed Nations: Aging populations Increase in government payments Rapid increase in number of elderly Increases social security, health care, long-term care, … MORE Travel Small house building boom Elderly want smaller houses What will they buy? Potentially too many large homes 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 / LESSONS 1985 – 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? MARKETING "Business has only two basic functions – marketing and innovation." -Peter Drucker THEY ARE BOTH MARKETING FUNCTIONS! MARKETING Theory – Application - Implementation 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 ENVIRONMENT Understanding Control and Influence Technology Social / Cultural Advancements, Trends Attitudes, Values, Lifestyle Human Resources Marketing Mix Talent pool Senior Management & Organization Structure Environmental / Natural Forces Stakeholders INTERNAL FORCES [controllable] Planning and Systems Capital / Economic Availability, Flows, Trends Supply Chain Management Competition Nature, Trends Government / Political / Legal / Regulatory External [environmental] forces are generally uncontrollable by the firm. 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 SHARE Global Microprocessor Revenue Q1,2009 Source: iSuppli Product hierarchy ◦ Brand ◦ Product Family ◦ Product line ◦ Product item INTEL Microprocessors Celeron® INTEL 80.6% AMD 11.5% Freescale 2.9% Others 1.8% IBM 3.2% 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! THE MARKETING MIX – The 4 P’s Controllable Marketing Mix Factors PRODUCT PLACE -PRODUCTS -SERVICES -Product / Service Combos -WHERE -EASE OF ACCESS PROMOTION PRICE Integrated Marketing -BENEFITS -VALUE Communications 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 Controllable Marketing Mix Factors: Asking the right questions PRODUCT PLACE Creates the Value In rank order, what are the three most important product benefits? In rank order, where do consumers prefer to purchase the product? PROMOTION PRICE Communicates the value Proves the value with benefits 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? 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 AND RELATIONSHIPS • Customer Value & Its Perception – How do you assess value? Clothing • Value Strategies – are all about real and/or perceived meaningful differentiation! CUSTOMER VALUE AND RELATIONSHIPS • Remember – there is only one best! • Best? Price • Best? Product • Best? Service Best perceived / proven value … Best perceived solution … for my situation. CUSTOMER VALUE AND RELATIONSHIPS • 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 features They 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 Starting point Factory Focus Means Existing products Selling and promotion Ends Profits through sales volume THE SALES CONCEPT Inside-out Market Customer needs Integrated marketing Profits through customer satisfaction THE MARKETING CONCEPT Outside-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 MARKETS AND SEGMENTS CONSUMER NEEDS INTEGRATED MARKETING COMMUNICATIONS PROFITS THROUGH SATISFACTION LEVERAGE BRAND EQUITY VERSUS THE SELLING CONCEPT WHICH EMPHASIZES THE COMPANY 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 - Mission Core values - Culture Business definitions and missions Strategic direction [leadership] Infrastructure [core competencies] SBUs Marketing plan Objectives & Situation analysis Segmentation and target marketing Positioning Sales plan Marketing mix Product – 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? MARKETING Theory – Application - Implementation 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 ORGANIZATION WORKING RELATIONSHIPS STRATEGIC DIRECTION OF THE FIRM BOARD / CEO / COO / CMO / GROUP VP Board of Directors and C-level executives President or General Manager or Managing Director [International] BUSINESS UNIT MARKETING OFFICER THE MARKETING PLAN PRODUCT MARKET CUSTOMER MANAGEMENT RESEARCH SERVICES PRODUCTS & SERVICES CUSTOMER SURVEYS PRICING NEEDS RESEARCH CUSTOMER CARE INTEGRATED MARKETING SALES SALES ORGANIZATIONS FORCES COMMUNICATIONS ADVERTISING PROMOTION CHANNEL MANAGEMENT PUBLIC RELATIONS SALES FORCE DIRECTION SALES MATERIALS SALES MANAGEMENT DAILY SALES ACCOUNT MANAGEMENT CUSTOMER RELATIONSHIPS TYPES OF SALES ORGS. BRAND MANAGEMENT INTERNAL EXTERNAL COMMUNICATIONS CONTINUUM FOCUS 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 benefits AND • 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. SBU STRUCTURE – An example General Electric Corporate GE Commercial Finance GE Industrial GE Money (business loans, leases) (appliances, lighting, factory automation) (consumer home loans, credit cards) GE Healthcare GE Infrastructure GE NBC Universal (imaging, diagnostics, life-support systems) (aircraft engines, energy, transportation) (television, music, film) 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 TECHNOLOGIES / PRODUCTS / SERVICES MARKETS / SEGMENTS A P P L I C A T I O N S N E E D S 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. Star Trek Enterprise Why 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 DIRECTION A 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 PRODUCT ORIENTED MARKET ORIENTED DISNEY Theme parks Fantasies & What entertainment businesses are they in? WAL-MART Discount stores Value to middle class COMPANY This slide is likely from an earlier Kotler text circa 2000-2010. BUSINESS EXTENSIONS What can they sell? What can they not sell? 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 MATRIX Boston Consulting Group Build - invest heavily in tomorrow Hold – But decide quickly then act Harvest for cash for reinvestment in the firm Divest [or discontinue] – redeploy key assets 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. GE / MCKINSEY MATRIX Strong Low Medium High MARKET ATTRACTIVENESS BUSINESS STRENGTH Medium Weak SBU A SBU B SBU C SBU D Invest & grow Selective growth Harvest: divest / dissolve 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 ANALYSIS Analyze your firm and your major competitors. IP Low cost structure INTERNAL EXTERNAL STRENGTHS OPPORTUNITIES BUILD EXPLOIT Take advantage of Market the firm’s position strengths LEVERAGE CONSTRAINTS New markets, channels Use the firm’s strengths to offset Acquisitions competitive threats VULNERABILITIES Breadth of offering WEAKNESSES THREATS CORRECT AVOID Lack of management talent Offset the firm’s weaknesses Weak finances NPD PROBLEMS Counter threats Rapidly changing market New entrants Government regulations 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 COMPETITIVE ADVANTAGE Customer Perceived Uniqueness C O M P E T I V E S C O P E INDUSTRY DIFFERENTIATION Perceived value WIDE Caterpillar, IBM Low Cost Position OVERALL COST LEADERSHIP Commodities, Dell, Wal-Mart MARKET NICHE / FOCUS SEGMENT Understanding and focus ONLY No direct battles with major competitors MIDDLE OF THE ROAD [LOSING] STRATEGY – Chrysler, Sears Michael Porter, Harvard, Competitive Strategy, Free Press,1980 . ASSEMBLING THE MARKETING MIX 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 MARKETING Theory – Application - Implementation 3 SCANNING THE MARKET ETHICS UNDERSTANDING YOUR ENVIRONMENT • Tracking trends • Understanding market forces, changes and trends – Competitive – Demographic – Economic • consumer income, business income – Regulation and Enforcement – Social – Technological 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 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: DEMOGRAPHICS Population and its movement DEMOGRAPHIC TRENDS: POPULATION 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 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 ECONOMIC FORCES: LEVELS OF CONSUMER INCOME 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. TECHNOLOGY FORCES: THE ELECTRONIC SOCIETY • Marketplace • Marketspace • Electronic commerce – B2C • Changing payment alternatives – B2B PORTER’S FIVE FORCES MODEL: Industry Analysis What is the bargaining power of your key suppliers? What is the bargaining power of your key customers? What are the barriers to entry? What is the threat of substitute products and/or services? What is the threat of significant new entrants? What is the amount of rivalry among existing competitors? 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 GOVERNMENT FORCES: FEDERAL LAWS AND REGULATION • Intellectual property protection – – – – – Copyright Law Trademark Law Patent Law Trade Secret Law Knowledge Management GOVERNMENT FORCES: FEDERAL LAWS AND REGULATION • Pricing • Distribution – Exclusive – Exclusive territory – Requirement contracts – Tying arrangements / contracts ETHICS – LAWS - GUIDELINES, REGULATIONS, AND COMPLIANCE ETHICAL LEGAL AND COMPLIANT WITH GUIDELINES AND REGULATIONS ILLEGAL UNETHICAL 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 MARKETING Theory – Application - Implementation 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 BEHAVIOR Product Price Marketing and Other Stimuli Economic Technological Place Cultural Promotion Other Buying Decision Process Product Choice Buyer’s Black Box Buyer’s Response Buyer Characteristics Purchase Timing Brand Choice Amount → Seller Choice VALUE This slide is likely from an earlier Kotler text circa 2000-2010. Some words have been changed or deleted. CONSUMER BEHAVIOR Problem recognition The purchase decision process consists of five stages. FEEDBACK Graphic is from MARKETING, Kerin, Hartley, Rudelius, 10E, McGraw-Hill Irwin, p. 112, 2011. ISBN 13: 978-0-07-352993-6 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 BEHAVIOR Postpurchase Consumer’s Expectations of Product Quality Performance Ease of use … Satisfied Customer Unsatisfied Customer COGNITIVE DISSONANCE Doubt or regret about a purchase CLASSIFICATION OF CONSUMER PRODUCTS Convenience Products Shopping Products > Frequently purchased > Little effort > Low priced > Numerous locations > Considerable selection time & effort > Moderately brand loyal > Comparison shop > Few locations Staples, impulse items Clothing, appliances, services Specialty Products Unsought Products > Unique characteristics > Significant purchase efforts > Brand – limited locations > Little awareness or interest until need > Require much advertising & personal selling Hobby purchases, Rolex watch Insurance, some innovations Evaluate how Emergency Products you think about these different > Unexpected need > Speed with little to no brand loyalty types of purchases. Emergency room, ambulance, towing This slide is likely from an earlier Kotler text circa 2000-2010. CONSUMER BEHAVIOR Involvement 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 BEHAVIOR Involvement 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 CONSUMER BEHAVIOR Situational influences • 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 BEHAVIOR Four types of buying decisions HIGH INVOLVEMENT [Quality – Service – Facts] Use personal sales – quality, facts, service LOW INVOLVEMENT [Obvious differences] Use advertising, POP, emotional perceptions Significant differences between brands Complex Buying Behavior VarietySeeking Behavior Few differences between brands DissonanceReducing Buying Behavior Habitual Buying Behavior DURABLE GOODS [Furniture, appliances, long-lasting items…] Use subjective appeals, advertising NON-DURABLE GOODS [Grocery items, frequent purchases, …] Use sales promotion, price This slide is likely from an earlier Kotler text circa 2000-2010. CUSTOMER INVOLVEMENT CLASS EXERCISE Quality Canned peas Color Price Brand Distance CONSUMER BEHAVIOR Psychological influences - Maslow CONSUMER BEHAVIOR Psychological influences - Maslow • Personality type • Self-concept • Normal perception – Selective perception to selective retention • Subliminal perception CONSUMER BEHAVIOR Psychological 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 BEHAVIOR Psychological 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 BEHAVIOR Psychological influences - ATTITUDES • Attitude change – Changing beliefs • The brand • Its attributes – Importance of each attribute – New product beliefs and attributes CONSUMER BEHAVIOR Psychological influences - LIFESTYLE $ R E S O U R C E S CONSUMER BEHAVIOR Psychological influences - INFLUENCERS • Opinion leaders – personal and social • Word of mouth • Reference groups CONSUMER BEHAVIOR Psychological influences - FAMILY Graphic is from MARKETING, Kerin, Hartley, Rudelius, 10E, McGraw-Hill Irwin, p. 129, 2011. ISBN 13: 978-0-07-352993-6 CONSUMER BEHAVIOR Social influences - SOCIAL • Class – Upper, middle, lower [working] • Culture – Subculture • African-American, Asian-American, Hispanic buying patterns THE CONSUMER PERCEPTION IS THEIR 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!