mktg ch2

marketing (definition)

 a process by which companies create value for customers and build strong relationships in order to capture value from customers in return

marketing

 creates a form, time, place and ownership utility

-occurs in many settings

-can be performed by individuals and organizations

-Requires product, price, distribution and promotion

-Entails an exchange

-is about satisfying customer needs and wants

evolution of marketing

simple trade->production era->sales era>marketing dept era->relationship marketing era->social media marketing

marektplace

Suppliers→Company/Competitors→market intermediaries→Final Customers

-each adds value

5 market orientations

production, product, sales, marketing, societal

production concept

“Build it cheap, and they will come”

-assumes that customers want affordable product, if you make cheap goods easily accessible it does most of the marketing

-doesn't require learning about customers, assumes they want cheap things so cutting costs is the most important thing

product concept

-assumes customers don't want cheap products, they want quality

-if product is good, price doesn't matter 

-not effective strategy because it doesn't consider the buyers wants/needs

sales concept

-persuade customers to buy , but doesnt care about what they want

-all about the hard sale-take existing products and push customers to buy them

-doesn't care about quality or price and don't worry about customer needs either

-aggressive selling often does the deal, but customer never comes back

marketing concept

-learn what the target demographic wants and work to satisfy those wants better than competition

-design a product with the customer in mind rather than pushing the product they feel like making

marketing concept process

MARKET→CUSTOMER NEEDS→INTEGRATED MARKETING→PROFITS THROUGH CUSTOMER SATISFACTION

societal concept

-puts human welfare on top before profits and satisfying the wants

-emphasizes social responsibility and suggests that to sustain long term success

strategic planning

the process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities

strategic planning involves

adapting the firm to take advantage of opportunities in a constantly changing environment

annual/long range plans

deal with the companies current businesses and how to keep them going

at corporate level

1. Define company mission(-What is our business, who is the customer, what do customers value, what should our business be?)

2. →set objectives and goals

3. →design business portfolio

at Business unit/product/other functional strategies level

-planning marketing and other functional strategies

mission statement

statement of an organization's purpose-what it wants to accomplish in the greater environment-acts as an “invisible hand” that guides people in the organization

-should be MARKET ORIENTED

-defined in terms of SATISFYING CUSTOMER NEEDS

-meaningful/specific/motivating

“Who, what, why”

business purpose

 to create and keep a customer

business portfolio

collection of businesses and products that make up the company

*best is one that fits the company's strengths and weaknesses to opportunities in the environment

business portfolio steps

1. Analyze current business portfolio (determine which should receive more/less/no investment)

2. Shape the future portfolio by developing strategies for growth and downsizing

portfolio analysis

management evaluates the products and businesses that make up the company

*want to put strong resources into more profitable businesses and phase down/drop weaker one

portfolio analysis process

1)identify Strategic business units (key businesses that make up the company)

-can be product line within a division or single product or brand

2) assess attractiveness of each SBU and decide how much support each deserves

-good idea to add/support ones that fit closely with core philosophy and competencies

BCG growth share matrix

-vertical axis=market growth rate measures market attractiveness

-horizontal axis=relative market share measures a company strength in the market

stars

 high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows.

cash cows

e low-growth, high-share businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment.

question marks

low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out.

dogs

low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash.

once classified it can

-invest more in the business unit to BUILD its share

-invest just enough to HOLD the SBUs share at the current level

-HARVEST the SBU milking its ST CF regardless of LT effect

-DIVEST the SBU by selling/phasing out and using resources elsewhere

BCG challenges

Difficult, costly and time consuming to maintain, hard to define SBU and measure market growth/share, don't provide advice for future planning

marketing main responsibility

 achieving profitable growth

-needs to identify, evaluate, select market opportunities and lay down strategies to capture

market penetration

Existing Market/Existing Products and services

• LOW RISK

  • Increasing the market share of current products with pricing strategies, promotions, advertising and increase in sales efforts

  • Drive out competitors with aggressive pricing and promotional campaigns

  • Increase usage of product by existing customers through special offers/loyalty schemes

market penetration ex

• Ex: add more stores/new features

product development

Existing Market /New Products and services

• SOME RISK

  • Add new features to existing products

  • Innovative /new technologies added to products/used to improve products

product development ex

• Ex: expand product lines

market development

New Market/Existing Products and services

• SOME RISK

  • Focus turned to new/untapped markets

  • New pricing procedures used to attract new target audiences

  • New distribution channels created to offer products new ways/to new customers

market development ex

• Ex: new demographics/geographic

diversification

New Market/New Products and services

high risk

concentric diversification

• leveraging the companies core technical know-how to diversify its current products into new markets

horizontal diversification

• introducing of products unrelated to companies core products to a market

conglomerate diversification

• purchasing of another company in order to diversify

  • Ex: start up/buy business outside current products/market

downsizing strategies

-due to growth too fast, lacks experience, market changes, less profitable, simply age/die

-must prune, harvest or divest

Marketing provides a guiding philosophy that suggests a company strategy should

1) revolve around creating customer value and building profitable relationships 2)provides inputs to planners by helping identify attractive market opportunities and assessing potential to take advantage of them 3) design strategies for reaching objectives

value chain

each department can be thought of as link that carries out value creating activities to design, product, market, deliver and support firms products

-success depends on how well each performs and coordination 

value delivery network

partnering with other members of the supply chain(suppliers, distributors, customers) to improve performance

-competition takes place between the entire value delivery network created by competitors

marketing strategy

logic by which company hopes to create customer value and achieve these profitable relationships

market segment

customers who respond in a similar way to a given set of marketing efforts

marketing mix

 set of tactical marketing tools that the firm blends to produce the response it wants in the target market

product

customer solution →ACCEPTABILITY

• Value creation

• Variety, quality, design, brand name, packaging

price

customer cost →AFFORDABILITY

• Value capture

• Discounts, credit terms, payment period

promotion

communication →AWARENESS

• Value communication

• Advertising, PR, sales promotion

place

 convenience →ACCESSIBILITY

• Value delivery

• Channels, inventory, locations, transportation

pure tangible good

soap

tangible good with accompanying service

Computer w/ accompanying services

hybrid offer

restaurant

Service w/ accompanying minor goods

Airline trip w/ accompanying snacks

pure service

massage

individual product decisions

Product attributes →branding →packaging →labeling/logos →product support

product line

group of products closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets or fall within given price range

product mix

all the product lines and items that a particular seller offers for sale

Ex: width, length, depth, consistency

consistency

how close the product lines are in end use, production requirements, or distribution channels→food industry is consistent, retail varies more

product mix width

the number of different product lines the company carries

product mix length

 the total number of items the company carries within its product lines

product mix depth

the number of versions offered of each product in the line

complexity of products

Core product→actual product→augmented product

core product

charge now, pay later

actual products

how you describe product

• Brand name, quality level, design, features, packaging

augmented product

extra benefits or add on features

• Delivery and credit, after sale service, product support, warranty

convenience products

products and services that the customer usually buys frequently, immediately and with a minimum comparison and buying effort

convenience products ex

Ex: newspaper, candy, fast food

shopping products

less frequently purchased consumer products and service that the customer compares carefully on suitability, quality, price and style

shopping products ex

Ex: furniture, cars, appliances

specialty products

consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort

specialty products ex

Ex: medical services, designer clothes, high end electronics

unsought products

 consumer products that the consumer does not know about or knows about but does not normally think of buying (unless there is a need)

unsought products ex

Ex: life insurance, blood donations, funeral services 

Factors differentiating services from goods

intangible, perishable, variability, inseparability

intangible

service cannot be seen, tasted, felt, heard or smelled before they purchase

perishable

service cannot be stored for later use or sale

variable

service quality depends on who provides the services as well as when, where and how the services are provided

inseparable

 service cannot be separated from their providers

disintermediation

SERVQUAL scale

measures service quality

relaibility

-ability to perform the promised service dependably and accurately-customers care about most

assurance

the knowledge and courtesy of employees and their ability to convey trust and confidence

tangibles

 appearance of physical facilities, equipment, personnel and communication materials

empathy

provision of caring, individualized attention to customers

responsiveness

willingness to help customers and provide prompt service

laggard

dont have social media, don't want to try new products right away

supply chain

’’make and sell” view includes the firms raw materials, productive inputs and factory capacity

demand chain

“sense and respond” view suggests that planning starts with the needs of the target customer

upstream partners

firms that supply raw materials, components, parts, information, finances and expertise needed to create a product or service

downstream partners

include the marketing channels or distribution channels that look toward the customer, including retailers and wholesalers (working directly with customers)

conventional channel

individual

Producer→wholesaler→retailer→consumer

Ex: smaller business

vertical channel

less intermediaries, a lot of overlap, work together as a whole to help understand different perspectives

Ex: many big companies

intensive distribution model

• Achieve mass market selling

• Convenience goods

• Many intermediaries

  • Ex: Coca Cola

selective distribution model

• Work with selected intermediaries

• Shopping and some specialty goods

• Several intermediaries

  • EX: Apple

exclusive distribution model

• Work with single intermediary

• Specialty goods with industrial equipment

  • Ex: state farm insurance or Gucci/Louis Vuitton

marketing channel design

designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives 

Analyzing customer needs

• Find out target customers want from the channel

• Identify market segments

• Determine the best channel to use

• Minimize the cost of meeting customer service requirements

setting channel objectives

• Determine targeted levels of customer service

• Balance customer needs against costs and customer price preferences