KENT 31 BAD 67051 Marketing Management Lecture 1 Marketing Management Thinking, Decision Making, & Positioning.

KENT 31KENT 31

BAD 67051BAD 67051Marketing ManagementMarketing Management

Lecture 1Marketing Management Thinking,

Decision Making,& Positioning

Marketing DefinedMarketing Defined

a) “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.”

b)…and a bit of controversy about the definition

Marketing ManagementMarketing Management

A. Definition 1“…the process of planning and executing

the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives.” [ugh]

Marketing ManagementMarketing Management

A. Definition 2Marketing Management is the management of “innovative and imitative processes” to identify and satisfy consumers cost effectively.

Don Kosec, TWC Business Don Kosec, TWC Business ServicesServices

Kosec…Importance of Marketing to Kosec…Importance of Marketing to Time Warner Business ServicesTime Warner Business Services

“Marketing Drives Sales”Collect Marketing Trends and Data,

Helps to determine incentives,

Use research and tools to Drive Sales through

Brand Awareness

II. Marketing Management II. Marketing Management PhilosophiesPhilosophies

• A. Production Concept

A. Production ConceptA. Production Concept

• Assumes consumers want products that are available and highly affordable.

• Implies management should focus on improving production and distribution efficiency.

• Useful when:–demand exceeds supply–product cost is too high

B. Product ConceptB. Product Concept

• Assumes consumers want product that offer the most quality, performance, and features.

• Implies the firm should make continuous product improvements.

• Places the focus on the product, not the customer.

C. Selling ConceptC. Selling Concept

• Assumes consumers will not buy enough product unless there is a strong sales and promotional effort.

• Useful for:–unsought goods–nonprofit areas

D. The Marketing ConceptD. The Marketing Concept

• Assumes that achieving the organization’s goals depends on determining and satisfying consumers more effectively and efficiently than competitors.

• Peter and Donnelly say:

“An organization should seek to make a profit by serving the needs of customer groups” (p. 4).

D. The Marketing ConceptD. The Marketing Concept

Three parts to the concept:

–The satisfaction of consumers’ needs, wants, and desires,

–at a profit (or to attain organizational goals),

–through an integrated effort within the firm.

Notes:Notes:• Firms must identify and satisfy

customers’ needs AND continue to do so!

• Competition FORCES sellers to focus on the consumer.

• Consumers must be seen in the context of all environmental/market factors (managers must also have a “market orientation”).

E. The Societal Marketing E. The Societal Marketing ConceptConcept

Assumes that customer satisfaction should be delivered in a way that maintains or improves the consumer’s and society’s well-being.

(a customer’s wants/needs may be at odds with what is good for society)

e.g., pollution control

III. The Marketing Concept III. The Marketing Concept and:and:

A. Synergy–Managers must create

marketing tactics that fit together well.

–They must coordinate implementation.

III. The Marketing Concept III. The Marketing Concept and:and:

B. Hypercompetition–Competitive Advantages do not last.

Customer Satisfaction and competition require innovation, cost advantages, and quality enhancements.

–Changes create new market segments, with new needs.

C. Cross Functional Decision Making Teams

III. The Marketing Concept and:III. The Marketing Concept and:

Market OrientationMarket Orientation

Customer Orientation

CompetitorOrientation

Interfunctional Coordination

PROFITS

Target Market

IV. Strategic PlanningIV. Strategic Planning

The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing markets.

Developed by senior managers– Future oriented– Intended to create objectives and strategies

for success against competition.(see P&D page 6)

IV. Strategic PlanningIV. Strategic Planning

The Process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing markets.

A. Defining the Company’s MissionB. Setting Company Objectives and

GoalsC. Corporate Strategies

Mission StatementMission Statement

a) The mission statement should be a clear and succinct representation of the enterprise's purpose for existence. It should incorporate criteria addressing concepts such as the moral/ethical position of the enterprise, public image, the target market, products/services, the geographic domain and expectations of growth and profitability.

b) The intent of the Mission Statement should be the first consideration for any employee who is evaluating a strategic decision.

http://www.businessplans.org/mission.html2-21

Dan Muller, President, Dan Muller, President, Distribution and Services, TimkenDistribution and Services, Timken

Mission/Vision at TimkenMission/Vision at Timken

WAS “World-wide Leader in Bearings and Steel”

BUT that put them in a “strategic box”

NEW “Improving Customer Performance”Allows “out of the box

thinking!”

For customers who are WILLING TO PAY for the VALUE we create.

Remember “At a Profit?”

XI. Setting Strategic DirectionsXI. Setting Strategic Directions

a) Three and ½ C’s of where we are NOW. Understand:

i. Our COMPETENCIES

1) Competitive Advantage

ii. Our CUSTOMERS

iii. Our COMPETITORS

2-24

Setting Strategic DirectionsSetting Strategic Directions

b) Where do we want to go?

i. Grow?

ii. Sustain?

iii. Divest?

iv. Invest?

Use Portfolio Analysis to help figure it out

2-25

Products Markets

Present Products

New Products

Present Customers

Market Penetration (more of same products to same market)

Product Development (new product to same market)

New Customers

Market Development/ Expansion (same product to new market)

Diversification (new product into new markets)

V. Types of Corporate V. Types of Corporate GROWTH StrategiesGROWTH Strategies

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets–1. Market Penetration

Market PenetrationMarket Penetration

• Increase sales of EXISTING products in CURRENT markets.

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets– 1. Market Penetration

–2. Product Development

Product DevelopmentProduct DevelopmentDevelop NEW PRODUCTS for CURRENT

markets to:– Meet changing CUSTOMER needs and

wants,– Match new COMPETITIVE offerings,– Take advantage of NEW

TECHNOLOGY, and– Meet the needs of SPECIFIC market

segments.

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets1. Market Penetration2. Product Development

B. Growth Strategies for New Markets1. Market Development

Market DevelopmentMarket Development

• Bring CURRENT products to NEW markets

• (e.g., Arm & Hammer)

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets– 1. Market Penetration– 2. Product Development

B. Growth Strategies for New Markets– 1. Market Development

–2. Market Expansion

Market ExpansionMarket Expansion

• Taking CURRENT products to NEW DOMESTIC geographic areas

• International Expansion–Regional strategy–Multinational strategy–Global strategy

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets– 1. Market Penetration– 2. Product Development

B. Growth Strategies for New Markets– 1. Market Development– 2. Market Expansion

–3. Diversification

DiversificationDiversification

• Taking NEW PRODUCTS to NEW MARKETS

• (e.g., Arm and Hammer Toothpaste)

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets

– 1. Market Penetration– 2. Product Development

B. Growth Strategies for New Markets– 1. Market Development– 2. Market Expansion– 3. Diversification

–4. Strategic Alliances

Strategic AlliancesStrategic Alliances

• Total collaboration by EXCHANGING key resources to enhance companies’ performance.

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current MarketsB. Growth Strategies for New Markets

C. Consolidation Strategies–1. Retrenchment

RetrenchmentRetrenchment

• WITHDRAW from WEAKER current markets

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets

B. Growth Strategies for New MarketsC. Consolidation Strategies

– 1. Retrenchment

–2. Pruning

PRUNINGPRUNING

• REDUCE the number of PRODUCTS offered in current markets

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current MarketsB. Growth Strategies for New MarketsC. Consolidation Strategies

– 1. Retrenchment– 2. Pruning

–3. Divestment

DivestmentDivestment

• Selling off part of the business -- ELIMINATE a product and a current market.

V. Types of Corporate StrategiesV. Types of Corporate Strategies

A. Growth Strategies for Current Markets

B. Growth Strategies for New Markets

C. Consolidation Strategies

D. Other Strategies

Other StrategiesOther Strategies

1. Based on Competitive Advantage

• Low Cost Leader or• Differentiation--Offer a unique value to customers based on:

Design, quality, service, variety, etc.

Other StrategiesOther Strategies2. Based on Value Disciplines

• Operational Excellence--“Okay” products, best price, least inconvenience

• Product Leadership

--Innovation for best product performance

• Customer Intimacy

VI. Product Portfolio Models VI. Product Portfolio Models

A. The Boston Consulting Group Growth-Share Matrix

(See P&D page 25)

The BCG ModelThe BCG Model

STAR

CASH COW

PROBLEMCHILD

DOG

Market-Growth

Rate

High

10%

Low

0%

Market Dominance10X High Low 0.1X

The BCG Model in the Music Industry – The BCG Model in the Music Industry – Def Jam’s Portfolio of ArtistsDef Jam’s Portfolio of Artists

STAR

CASH COW

PROBLEMCHILD

DOG

Market-Growth

Rate

High

10%

Low

0%

Market Dominance10X High Low 0.1X

2-50

Kanye West

Jay-Z

The Dream

Playaz Circle

LL COOL J

Ne-Yo

The BCG Model -- Cash CowsThe BCG Model -- Cash CowsDominant in Low Growth Market

– Low Growth Sales– Strong Profits– Generate a Large Cash Flow– Do NOT require Cash Resources to be

Reinvested– PROFITS flow to APPROPRIATE

Problem Children

The BCG Model -- DogsThe BCG Model -- Dogs

Low Market Share in Low Growth Market– Low Growth Sales– Weak Profits– Typically, generate a Little Cash Flow

(or have a weak future)– Not a good candidate for Cash

Resources to be Reinvested

The BCG Model -- Problem The BCG Model -- Problem ChildrenChildren

Low Market Share in High Growth Market– High Growth Sales– Weak Profits– Typically, require additional Cash to

become Dominant

The BCG Model -- StarThe BCG Model -- Star

Dominant in High Growth Market– High Growth Sales– Profitable, but requires attention– Requires Cash and Resources to stay

Dominant– Will be a Cash Cow in the Future

The BCG Model and Coca ColaThe BCG Model and Coca Cola

STAR

CASH COW

PROBLEMCHILD

DOG

Market-Growth

Rate

High

10%

Low

0%

Market Dominance10X High Low 0.1X

2-55

Dasani Full Throttle

Coca-Cola ClassicHi-C Coke Blak

B. The Directional Policy MatrixB. The Directional Policy MatrixCompetitive Position

MarketAttractiveness

High

Medium

Low

MediumStrong Weak

MaintainLeadership

ChallengeLeader

Cash Generator

ChallengeLeader

Manage forEarnings

Harvest

Harvest

Divest

Overcome,Niche, orQuit

XIV. Tracking Strategic Directions XIV. Tracking Strategic Directions with Marketing Dashboardswith Marketing Dashboards

a) What are they?• the visual display on a single computer

screen of the essential information related to achieving a marketing objective.

2-57

XIV. Tracking Strategic Directions XIV. Tracking Strategic Directions with Marketing Dashboardswith Marketing Dashboards

b) iDashboards – Driving Business Decisions (http://www.idashboards.com/)

2-58

VII. Marketing Management & the VII. Marketing Management & the Marketing PlanMarketing Plan

A. Situation Analysis

With an understanding of the organization’s mission and objectives, Marketing Planning begins with a situation analysis….with an eye toward opportunities and threats.

(SEE Peter and Donnelly, page 16)

XV. The Strategic Marketing XV. The Strategic Marketing ProcessProcess

a. Situation analysis with SWOT (see P&D page 210)

i. INTERNAL FACTORS

1) STRENGTHS

2) WEAKNESSES

ii. EXTERNAL FACTORS

1) OPPORTUNITIES

2) THREATS

2-60

Hunt on importance of SWOTHunt on importance of SWOT

Few techniques from the MBA are used more than the SWOT analysis

When you talk strategy, you go back to SWOT to ask the deep questions!

From the analysis you can develop appropriate strategies

b. ACTIONS based on SWOTb. ACTIONS based on SWOT

Type of Factor

Location of Factor

Favorable Unfavorable

INTERNAL

Strength Weakness

EXTERNAL

Opportunity Threat

CONVERT

Convert/Avoid

MATCH

MATCH

2-62

VII. Marketing Management & the Marketing PlanVII. Marketing Management & the Marketing Plan (P&D p.16-17)(P&D p.16-17)

CUSTOMER

VII. Marketing Management & the VII. Marketing Management & the Marketing PlanMarketing Plan

B. Develop a plan

•Establish Objectives

•Select the Target Market

•Develop the Marketing Mix

THE MARKETING MIXTHE MARKETING MIX

PROMOTION

PRODUCT

PRICE

PLACE

(Distribution)

CONSUMER

(Target Market)(Good, Service, Idea)

(Integrated Marketing Communications)

(Value)

VIII. Marketing Research: VIII. Marketing Research: Process and Systems for Process and Systems for

Decision MakingDecision Making

Research and Intelligence provide information necessary to clarify the “unknown.”

II. Environmental Factors Affecting II. Environmental Factors Affecting The OrganizationThe Organization

Competition

Regulatory

Economic

Technology Social

PROMOTION

PRODUCT

PRICE

PLACECONSUMERCoop-erative

Michael Scott, Head Chief, Dunder MifflinMichael Scott, Head Chief, Dunder Mifflin

How have you adapted?

RECOGNIZE the factor and then

….IGNORE IT????

Teaching Point: This is EXACTLY what some managers DO!

Sources of Market IntelligenceSources of Market Intelligence

A. Secondary Data

Data previously collected by someone else for a purpose other than the one at hand

Sources of Market IntelligenceSources of Market Intelligence

1. Advantages of Secondary Data:• Almost always less expensive than

primary data• Can be obtained rapidly• Can provide understanding of the

existing knowledge base and gaps

2. Disadvantages of Secondary Data:• Since it is previously collected data,

may be out-dated• May be collected only periodically• May not have been collected in the

form preferred• May not be able to assess its accuracy

3. Examples of Secondary Data:• Census Bureau data and other

Government reports• Sales & Marketing Management

Survey of Buying Power and other Industry newsletters

• Computer Databases• The Internet

3. Examples of Secondary Data:

• Competitor Reports• Scanner Data

Sources of Market IntelligenceSources of Market Intelligence

B. Primary Data

Data gathered and analyzed specifically for the purpose at hand

Sources of Market IntelligenceSources of Market IntelligenceC. Types of Primary Data1. Surveys:• Information is gathered from a sample of

people by means of a questionnaire

–Customer Surveys: Values, Benefits, Beliefs, and Satisfaction

–Focus Groups

Sources of Market Intelligence

C. Types of Primary Data

2. Observation:• Systematic recording of behavior or

events as they are witnessed

– Customer Visits

– Vendor Visits

– Competitive Product Usage

C. Types of Primary Data

3. Experiments:• Cause and effect relationships by

changing variables to observe response of another variable

– Test markets for changes in price, product, distribution, and promotion

Sources of Market Intelligence

Sources of Market IntelligenceSources of Market IntelligenceC. Types of Primary Data4. Other

–Trade Shows–Reverse Engineering

5. Research Firms:Marketing Research Companies atGreenBook (http://www.greenbook.org/ )

IX. Decision Support SystemsIX. Decision Support Systems

A. Decision Support System Defined:…a coordinated collection of data, system

tools, and techniques with supporting software and hardware by which an organization gathers and interprets relevant information from business and the environment and turns it into a basis for making management decisions.

MarketingIntelligence

Internal recordsand reports

MarketingResearch

Database

Data Collection System Decision Support System

Analytic Models

InteractionSystem

IX. Decision Support Systems

IX. Decision Support SystemsIX. Decision Support SystemsB. Database:• a collection of information that is

arranged in a logical manner and organized in a form that can be stored and processed by a computer

C. Analytical models system:• the database management software that is

used to analyze or provide access to the data within the system

IX. Decision Support Systems

D. User interaction system:• the software that manages the interface

between the user and the system

X. Hypercompetitive Market X. Hypercompetitive Market ResearchResearch

Cross functional teams continuously stay in close touch with lead consumers and suppliers

XI. Global Market ResearchXI. Global Market ResearchA. Global Information System = an organized

collection of:– telecommunications equipment, – computer hardware and software, – data, and– personnel

designed to:– capture, store, update, manipulate, analyze, and

immediately display information about worldwide business activities

XI. Global Market ResearchXI. Global Market Research

B. Global Market Research– 1. Who Does the Research?– Local Group?– Company Team Nearby?– Secondary vs. Primary– 2. The Visit by Executives– Trade Mission– Trade Fair

XII. Market SegmentationXII. Market SegmentationA. The MARKET is the set of

all actual and potential buyers of a product.

B. A MARKET SEGMENT is a group of consumers with distinct, shared needs.

Need for Speed

Family Mobile

Entry-level Car

• So, the members of each segment are similar with respect to the factors that influence demand (and different from one another)

C. Basic Strategies

1. Undifferentiated Marketing

(Market Aggregation,

Mass Marketing)

Product

Price Place

Price

The firm

TheTarget Marketxxxxxxxxxx

Undifferentiated Marketing

Ford Motor Co. in 1925Ford Motor Co. in 1925

Model

T

Model

T

Model

T

Model

T

Model

T

Model

T

Model

T

Model

T

Model

T

C. Basic StrategiesC. Basic Strategies

2. Differentiated Marketing

Segment the market and create different marketing mixes for each.

(e.g., Church & Dwight Co.)

Product

Price Place

Price

The firm

Product

Price Place

Price

Product

Price Place

Price

Segment 1

Segment 2

Segment 3

Focus Fusion Mustang

Taurus

Escape Thunderbird Ford GT

EdgeFusion Hybrid

Ford Motor Co. Todayhttp://www.fordvehicles.com/cars/

C. Basic StrategiesC. Basic Strategies

3. Concentrated Marketing

Segment the market and create a marketing mix for only one (or a few) segments.

Product

Price Place

Price

The firm

Segment 1

Segment 2

Segment 3

Concentrated or NicheMarketing

C. Basic StrategiesC. Basic Strategies

4. “Atomization”

Create a separate marketing mix for EACH customer

(Mass customization)

D. Segmenting Consumer D. Segmenting Consumer MarketsMarkets

1. Based on Consumer Characteristicsa. Geographic Segmentation

• Regional: NE, SW, Midwest• Size: County, City, SMSA• Density: Rural, Suburban, Urban• Climate

D. Segmenting Consumer D. Segmenting Consumer MarketsMarkets

1. Based on Consumer Characteristics

b. Demographic Segmentation• Age, sex, family size, family life cycle, income, occupation, education, religion, race, nationality

Demographic Targeting by AgeDemographic Targeting by Age

Crest targets adults with the ad and product on the left, and children with the ad and product on right.

30 35 40 45 50 55 60 65

$100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

JaguarMercedes

PorcheAudi

LincolnCadillac

Saab BMW

Volvo

Acura

MercuryBuick Chrysler

Oldsmobile

FordPlymouth Chevrolet

DodgeRenault

Yugo

Hyundai

Mazda Honda Toyota

Peugeot

Alfa Romeo

Media Household Income

Median Age of BuyersJuly 1988

D. Segmenting Consumer Markets

1. Based on Consumer Characteristics

c. Psychographic Segmentation• Personality• Psychology• Life Style

D. Segmenting Consumer D. Segmenting Consumer MarketsMarkets

1. Based on Consumer Characteristicsc. Psychographic Segmentation

• VALS/VALS2• http://www.strategicbusinessinsights.com/vals/

presurvey.shtml

• PRIZM– http://www.clusterbigip1.claritas.com/MyBestSegments/Defaul

t.jsp?ID=20

D. Segmenting Consumer Markets

2. Based on Consumption-related Behaviors

a. Product Usage-Situation• “Reason” for the purchase (e.g., when it is used)

b. Benefit (need) Segmentation• “Why” the product is bought

D. Segmenting Consumer Markets

2. Based on Consumption-related Behaviors

c. Volume of Product Usage• Light-, Medium-, Heavy-users• “Heavy Half”

d. Brand Loyalty

D. Segmenting Consumer Markets

3. Based on Decision-related Behaviors

a. Price Sensitivity

b. Search Behavior• Complex• Limited• Routine

E. Segmenting Business Markets

1. Size of the account

2. Growth potential

3. Benefits sought

4. Usage Situation

5. SIC codes

Muller on Segmentation at TimkenMuller on Segmentation at TimkenPrimarily by industry

•Primary metals•Wind energy•Power generation•Cement•Automotive•Off highway construction vehicles

And then further with micro segmentation•Short lead time•Longer life•More productivity

Challenge to discover the segment’s needs and to create a mix for each

F. Is It a “GOOD” Segment?F. Is It a “GOOD” Segment?

1. Is it Measurable?

2. Is it Meaningful?

3. Can it be Reached?