Week 13 - Marketing Class

Marketing (course definition)

The creation and satisfaction of demand for a product or service.

Strategy (course definition)

A set of ideas that outline how a product line or brand will achieve its objectives.

Tactic (course definition)

A specific action or method that contributes to achieving a goal.

Why defining marketing as "advertising" is wrong

Advertising is only one component of marketing; it does not capture the full breadth of the discipline (research, product, pricing, distribution, promotion, service).

Peter Drucker on the purpose of business

Because the purpose of business is to create a customer, the enterprise has two and only two basic functions: marketing and innovation. All the rest are costs.

The 8 universal functions of marketing

Buying; selling; transporting; storing; standardization and grading; financing; risk taking; market information.

Buying (universal function)

Looking for and evaluating goods and services.

Selling (universal function)

Promoting the product to prospective buyers.

Transporting (universal function)

Moving goods from one place to another.

Storing (universal function)

Holding an inventory of goods until needed by customers.

Standardization and grading (universal function)

Sorting products by size and quality.

Financing (universal function)

Providing the cash and credit needed to produce, transport, store, promote, sell, and buy products.

Risk taking (universal function)

Assuming responsibility for uncertainties.

Market information (universal function)

Collecting, analyzing, and distributing all the information the marketer needs to plan, implement, and control need-satisfying marketing activities.

Why the marketing functions are called "universal"

They overcome separations and discrepancies between parties who wish to exchange. WHO performs them varies widely by country or culture, but ALL of them are needed in any marketing system.

Customer value

The difference between the benefits a customer sees from a marketing offering and the cost of obtaining those benefits. Always taken from the customer's point of view.

Four things the course says about customer value

Different customers see benefits and costs differently; the customer may not dwell on value as the key buying determinant; competition affects perceived value; higher customer value builds stronger and longer-lasting relationships.

Exam trap: which activity is NOT marketing

Building a facility to make the product is PRODUCTION, not marketing. Advertising a grand opening, researching popular designs, testing price points, and selling in a showroom are all marketing.

Bicycle example: the questions marketing must answer

What bikes consumers want and which consumers to satisfy; how many riders and how many units; where consumers are and how to get bikes to them; what price they will pay and whether it is profitable; what promotions to use; the impact of competitors; and how to provide after-purchase customer service.

The 5 C's

Customers, Company, Competitors, Collaborators, Context. Customers are drawn at the center on purpose.

Customers (5 C's)

Potential buyers with wants and needs the company aims to fulfill. "Consumers vs. customers" usually just distinguishes non-business buyers from business buyers.

Company (5 C's)

The organization or business unit providing the offering. The INTERNAL look at positioning, messaging, differentiators, and core capabilities. Tools: SWOT, perceptual and positioning maps, marketing mix differentiation.

Competitors (5 C's)

Organizations offering products and services that aim to fulfill the same wants and needs of the same customers. Tools: competitive matrix, Porter's Five Forces.

Collaborators (5 C's)

External business entities that work with the company to create customer value: raw material suppliers, distributors, marketing agencies, third-party retailers. Examples: Louis Dreyfus supplying sugar to Nabisco and Dr Pepper; Target and Home Depot reselling Samsung.

Context (5 C's)

The environment the company operates in and its elements: regulations and laws, economic conditions, cultural norms, technological factors. Assessed at the macro level with PESTEL.

PESTEL

Political, Economic, Social, Technological, Environmental, Legal. The macro tool used to analyze the Context element of the 5 C's.

Exam trap: SWOT, perceptual maps, and positioning maps

FALSE that these are used exclusively for evaluating external competition. They are primarily COMPANY (internal) analysis tools, although company and competitive analysis are not mutually exclusive.

Marketing strategy

Specifies a target market and a related marketing mix. The two core components of marketing strategy are the target market and the marketing mix.

Target market

A fairly homogeneous (similar) group of customers to whom a company wishes to appeal.

Marketing mix

The controllable variables the company puts together to satisfy the target market; the controllable variables the marketer uses to create and harvest demand. Distractors: value proposition, the 4 C's, competitive offering, the 4 differentiators.

Marketing strategy planning

Finding opportunities and developing profitable marketing strategies the company can use to capitalize on them. It is a narrowing-down process.

Customer marketing model, in order

Awareness; interest and engagement; acquisition; customer segmentation; customer retention; support and advocacy.

Awareness (customer marketing model)

Creating an identification moment in the customer's mind. They may not know your offerings, but they know you exist.

Interest and engagement (customer marketing model)

Informing the customer about the offerings and encouraging them to interact and learn more. Answers "now that I know you exist, why should I care?"

Acquisition (customer marketing model)

Converting a prospect into a customer who is actually using and paying for the offering.

Customer retention (customer marketing model)

Convincing existing customers to purchase again. Infrequent for durables such as autos and appliances; very frequent for non-durables such as fuel and food.

Support and advocacy (customer marketing model)

The "holy grail" of marketing: customers so satisfied they do your marketing for you. Usually still requires tactful encouragement.

Customer profiles / personas

Semi-fictional depictions of the target audience. Most organizations build more than one, each representing a distinct target market segment.

Components of a customer persona

Demographic and geographic variables; psychographics; behavioral variables; and RFM attributes. Elements included should be relevant enough to affect the marketing mix.

RFM attributes

Recency, Frequency, Monetary.

Psychographic profiling variables (exam item)

Lifestyle, values, attitudes, and personality. NOT psychographic: brand loyalty (behavioral) and marital status (demographic).

Exam trap: NOT a component of customer profiles/personas

"Assumption attributes" - speculation data, company opinions, guesstimates. Personas are built from data, not guesses.

The buyer journey (course version)

Three primary stages: discovery, consideration, and decision. The point is to identify where the buyer is and match the interaction to that stage.

Panasonic Toughbook lesson

Product features are a means to an end. What the customer really wants is reliability under rough conditions. Strong relationships come from exceeding expectations and showing deep understanding of wants and needs.

The comprehensive marketing-concept model

Total company effort to satisfy customers: offer superior customer value, attract customers, satisfy customers, retain customers, increase sales to customers, and build profitable customer relationships.

Marketing plan vs. marketing strategy

A marketing STRATEGY is a target market plus a marketing mix. Add time-related details and you have a marketing PLAN.

What a marketing plan must make clear

What marketing mix will be offered, to whom, and for how long; what company resources are needed and at what rate; what results are expected; and the control procedures so problems are caught.

Marketing program

The result of adding together more than one marketing plan.

Marketing management process

The planning, implementation, and control of marketing activities. These are continuous, and past decisions in one area affect the others.

Strategic management planning

Developing and maintaining a match between an organization's resources and its market opportunities, including planning for marketing, production, finance, human resources, and other areas.

Marketing strategy vs. whole-company plan

Marketing strategies are NOT whole-company plans, but company plans should be market oriented. The marketing plan sets the tone and direction for the whole company.

Implementation vs. control

Implementation is putting marketing plans into action. Control is assessing and evaluating marketing performance and taking corrective action when results fall short.

Target marketing

Tailoring the marketing mix to meet the needs of a specific group of target customers. Not necessarily a small segment, only a fairly homogeneous one.

Mass marketing

Offering a single marketing mix combination to everyone. It assumes everyone is the same and treats everyone as a potential customer.

Exam trap: production-oriented manager and target marketing

FALSE. A production-oriented manager sees everyone as basically the same and practices MASS marketing. Target marketing is what the marketing-oriented manager practices.

Breakthrough opportunity

An opportunity that helps innovators develop hard-to-copy marketing strategies that will be profitable for a long period of time.

Competitive advantage

A marketing mix that the TARGET MARKET evaluates as better than a competitor's mix. It must be viewed from the customer's perspective, not the firm's, and can come from excellence in any area of the mix or from other firm resources.

Market penetration

Increasing sales of the firm's PRESENT products in its PRESENT markets. Examples: the Starbucks corporate gift card program; Lipton ads urging current customers to drink tea instead of coffee at morning coffee breaks.

Product development

Offering NEW or improved products to the firm's PRESENT markets. Example: Tylenol Extra Strength Rapid Release Gels with laser-drilled holes that start working in five minutes.

Market development

Taking PRESENT products into NEW markets. Example: E-Z-Go promoting golf carts as a quiet way for workers to get around malls, airports, and big factories.

Diversification

Moving into totally different lines of business - NEW products aimed at NEW markets.

Old Spice body wash insight

Although men are the users, P&G's research found the majority of purchases were made by women shopping for the household, so advertising and positioning were first aimed at women. Packaging and promotion later shifted more masculine to maximize share.

Chrysler minivan (1984) insight

Observing how customers actually used their vehicles revealed how hard it was for parents to get children and gear in and out. The sliding side door solved it. Innovation can be a thoughtful combination of existing capabilities, not a technological breakthrough.

Customer lifetime value (LTV)

The total stream of purchases that a customer can contribute to the firm over the length of the firm-customer relationship. The course gives NO formula. Near-miss distractors: customer whole value, customer estimated value, customer worth, customer satisfaction value.

How firms grow lifetime value

Everything that exceeds customer expectations builds loyalty, and loyalty drives LTV. Example: Amazon Prime bundles free shipping, video, and music so customers become loyal and stop price-comparison shopping.

Why consider international opportunities

Trade barriers have generally eased and telecom has improved. Expansion drives down per-unit manufacturing costs, an early start builds brand advantage, and trends abroad may be more favorable - but risk is higher, so build contingency plans.

The four Ps

Product, Place, Promotion, Price. NOT Profit, NOT People, NOT Production, NOT Personal Selling.

Product (marketing mix element)

Physical characteristics of the product, warranties associated with it, and the application benefits it delivers. Example: Rubbermaid collapsible containers.

Place objective

Get the right product to the right consumer, in the right place, at the right time, in the right quantity, and in the right condition - at a reasonable cost and at a level customers see as high value.

Channel of distribution

Any series of firms or persons used to move goods from producers or manufacturers to final users. Channels can be short or complex.

Promotion

Informing the target market about the product or service and selling it to the target customer. Three main types: personal selling, mass selling, and sales promotion.

Personal selling

Direct, spoken communication between sellers and potential customers. Includes customer service, where a seller resolves a problem with a purchase.

Mass selling

Communicating with large numbers of customers at the same time. Includes advertising and publicity.

Advertising

A PAID form of non-personal presentation of ideas, goods, and services by an identified sponsor.

Publicity

UNPAID, non-personal presentation of ideas, goods, or services. Includes creating and placing web content others find or pass along, and is the basis of "earned media."

Sales promotion

Promotion activities OTHER than advertising, publicity, and personal selling that stimulate interest, trial, or purchase - discounts, free product trials, coupons, samples, aisle displays, point-of-purchase materials. Classify these under PROMOTION, not Place.

Price (marketing mix element)

The revenue-generating function of the marketing mix. Setting the right price is a combination of science and art.

Price policies listed in the course

Price flexibility (shifting price from one customer to another); how price changes over the product life cycle; allowances and discounts; geographic pricing terms; and the impact of competition.

Apple pricing lesson

Apple rarely discounts current products, and its consistently higher price signals quality and reliability. Price is a lever marketers use to send signals and reinforce brand positioning.

How the four Ps relate to one another

No single P is more important than the others. They are interconnected and all four P decisions should be made holistically around the target customer.

Two parts of the marketing environment

The DIRECT market environment and the EXTERNAL market environment.

Direct market environment

Customers; the resources and objectives of the company; and the firm's competitors.

External market environment (4 components)

Economic environment; technological environment; political and legal environment; cultural and social environment.

Exam trap: what is NOT part of the external market environment

The COMPETITIVE environment. This course puts competitors in the DIRECT market environment and treats competitive analysis separately.

Who counts as a competitor

Not only current competitors, but potential competitors and indirect competitors as well.

Mission statement and the objectives hierarchy

The mission statement sets the organization's basic purpose for being. Company objectives frame marketing objectives; marketing objectives drive objectives for each mix element (e.g., promotion objectives), which drive sub-objectives for each element of the promotion blend. Objectives should be quantified and tied to deadlines.

Company resources that limit the search for opportunities

Financial strength; producing capability and flexibility; marketing strengths (familiar brand, strong channel relationships, brand advertising, industry-leading sales force); and the knowledge of the firm's people.

Course examples of company resource strengths

Financial strength (AT&T); production flexibility (Dell); R&D (IBM); channel relationships (P&G); loyal customer base (Apple); new product capability (3M).

Aveeno body wash example

Aveeno was not known for body wash, but a familiar brand name plus decades of association with quality ingredients and dermatologist recommendation let it extend into a new category. A company resource converted into competitive advantage.

Four market situations

Monopoly; monopolistic competition; oligopoly; pure competition.

Monopoly

One company serves the entire customer base. Competitor-free environments are rare within the United States.

Monopolistic competition

A number of different firms offer marketing mixes that at least some customers see as different. It is the typical situation and a significant challenge; each firm attempts to monopolize its own target market.

Oligopoly

A small number of firms control the market and barriers to competitive entry are often very high.

Pure competition

A large number of firms compete with essentially similar or commodity-like products. Price is typically the determining purchase factor because consumers see little or no difference.

Why differentiation matters competitively

Without perceived difference the offering is treated as a mere commodity and buyers decide on cheapest price alone. Example: the SudaCare mini waterless vaporizer avoids head-on competition with a menthol and eucalyptus blend, an easy-to-replace refill pad, and continuous eight-hour release.

Economic environment

Affected by the interactions of all elements of the macroeconomic system and can change very rapidly. In a recession consumers cut spending on non-necessities; high inflation pushes interest rates up and buying power down; global trade adds exchange-rate effects.

Political environment

How and to what degree a government intervenes in the economy - trade policies, labor laws, and the political stability of the region.

Legal environment

Health and safety, advertising standards, product safety, product labeling, and consumer rights. The FDA controls food and drugs and set nutritional labeling standards; the Consumer Product Safety Act of 1972 empowers removal of unsafe products; state and local laws (e.g., auto franchise laws) and national laws vary widely.

Cultural and social (sociocultural) environment

The shared beliefs and attitudes of a population in a given area, affected by population growth, age distribution, health consciousness, and career attitudes. It directly shapes how marketers understand customers and what drives them.

Strategic planning grid

Positions opportunities by INDUSTRY ATTRACTIVENESS and BUSINESS STRENGTHS. Blue area = growth opportunities to pursue; yellow = borderline, analyze more fully; red = avoid unless there is a compelling reason.