Marketing

Today’s Topic: Today’s Topic: The Marketing FunctionThe Marketing Function

What it is; What it is; why it matters; why it matters;

and how technologists can and how technologists can interact with, support, and interact with, support, and

add value to itadd value to it

Today’s AgendaToday’s Agenda The marketing function and The marketing function and

marketing decisions, including marketing decisions, including R&D’s roleR&D’s role

Return graded mid-term examsReturn graded mid-term exams The R&D-marketing interface: the The R&D-marketing interface: the

good, the bad, and the uglygood, the bad, and the ugly Readings/assignment for next Readings/assignment for next

week: sales channelsweek: sales channels

MarketingMarketing

Responsibilities, Roles, Responsibilities, Roles, RelevanceRelevance

Marketing is responsible Marketing is responsible for for

“marketing mix” “marketing mix” decisions decisions (C + 4P’s)(C + 4P’s)

CCustomers/needs to be targeted ustomers/needs to be targeted (segments)(segments)

PProduct (definition of the “whole product”)roduct (definition of the “whole product”) PPrice (levels and strategies)rice (levels and strategies) PPromotion (communication) romotion (communication) PPlace (sales/distribution methods)lace (sales/distribution methods)

If that’s what If that’s what marketing does…marketing does…

who’s responsible who’s responsible for revenues and for revenues and

profits?profits?

The only choices The only choices are…….are…….

Senior mgmt (CEO/president, group head, ...)Senior mgmt (CEO/president, group head, ...) Marketing Marketing R&DR&D SalesSales Operations (manuf, service ops, logistics)Operations (manuf, service ops, logistics) Support: IT, Finance, HR, Legal, Support: IT, Finance, HR, Legal, Investor Relations, Public/MediaInvestor Relations, Public/Media Relations (PR), etcRelations (PR), etc

What is Marketing’s What is Marketing’s “true north” in making “true north” in making

mix decisions?mix decisions?

What is Marketing’s “true What is Marketing’s “true north” north”

in making mix decisions?in making mix decisions?Market and financial Market and financial

objectivesobjectives, ,

based on based on corporate corporate strategy/objectivesstrategy/objectives (if (if

available), available),

guided by the guided by the competitive competitive advantageadvantage strategy strategy

Mix elements: Mix elements: CustomersCustomers

Customer segments targeted (industry, Customer segments targeted (industry, size, demographics, psychographics, size, demographics, psychographics, ….), and/or….), and/or

Needs addressed (customer problems, Needs addressed (customer problems, particular features needed, price particular features needed, price sensitivity, service needs, ….) sensitivity, service needs, ….)

Specificity here simplifies other Specificity here simplifies other mix decisions!mix decisions!

Mix elements: Mix elements: ProductProduct Product design/featuresProduct design/features Cost target (or profit target)Cost target (or profit target) Competitive positioningCompetitive positioning Name, and fit with brandingName, and fit with branding PackagingPackaging Customer serviceCustomer service Breadth and depth of product line Breadth and depth of product line

(versions)(versions)

Mix elements: Mix elements: PricePrice PricePricess: manufacturer, : manufacturer,

wholesaler, distributorwholesaler, distributor Payment terms and conditionsPayment terms and conditions WarrantyWarranty Discount policiesDiscount policies Price strategy vs. competitorsPrice strategy vs. competitors Bidding tacticsBidding tactics

Mix elements: Mix elements: PlacePlace Channel choice: direct and/or indirect Channel choice: direct and/or indirect Channel length and breadthChannel length and breadth Channel partner selectionChannel partner selection Franchising policiesFranchising policies Channel coordination and controlChannel coordination and control Channel competenciesChannel competencies Channel training (sales and product)Channel training (sales and product)

Mix elements: Mix elements: PromotionPromotion BrandingBranding AdvertisingAdvertising Direct marketing (mail, catalog, Direct marketing (mail, catalog,

telemarketing, internet) telemarketing, internet) Public relations and industry Public relations and industry

relations relations Trade shows and eventsTrade shows and events Price promotionsPrice promotions

The mix should “fit” The mix should “fit” with…..with…..

Needs/desires of the Needs/desires of the target markettarget market The The companycompany’s competencies and “image”’s competencies and “image” CompetitorCompetitors and their strategies/programss and their strategies/programs Channel partnersChannel partners’ needs and ’ needs and

competenciescompetencies

And….the And….the competitive advantagecompetitive advantage decision decision

Consider the HP-MPD Consider the HP-MPD situation…...situation…...

What should the What should the rolerole of R&D be in making of R&D be in making the decisions MPD the decisions MPD

faces?faces?

HP-MPD DecisionsHP-MPD Decisions Competitive advantage(s)?Competitive advantage(s)? Target customers? Target customers? Product features and price? Product features and price? Customization focus?Customization focus? Precision Architecture and Unix?Precision Architecture and Unix? Resolving sales issues?Resolving sales issues? Pricing?Pricing?

R&D’s Role in MPD’s R&D’s Role in MPD’s Business DecisionsBusiness Decisions

Provide information, Provide information, ask questions, ask questions,

pose relevant considerations, pose relevant considerations, provide opinions, provide opinions,

vote, vote, or decide…...???or decide…...???

How can R&D assist in How can R&D assist in mix decisions?mix decisions?

Information, knowledge, Information, knowledge, perspective, questions, perspective, questions, challenges, proposals, challenges, proposals,

opinions, votes………or not at opinions, votes………or not at all !!all !!

Mid-term exam gradingMid-term exam grading Each paper reviewed 3 separate times Each paper reviewed 3 separate times

(scan, grade, re-look for consistency)(scan, grade, re-look for consistency)

Each question scored in 1/2 point Each question scored in 1/2 point intervalsintervals

Points scored out of 25 determined Points scored out of 25 determined gradegrade

Class participation Class participation gradegrade

Grade depends on both quality (more Grade depends on both quality (more important) and frequency (less important) and frequency (less important) of comments, questions and important) of comments, questions and answers to class assignmentsanswers to class assignments

Second half of semester will count for Second half of semester will count for 2/3 of participation grade !!2/3 of participation grade !!

R&D-Marketing R&D-Marketing IntegrationIntegration

What it’s important to “integrate,” What it’s important to “integrate,” and whyand why

R&D/marketing: respective desires R&D/marketing: respective desires for integrationfor integration

Perceptions of actual integrationPerceptions of actual integration Areas of greatest dissatisfactionAreas of greatest dissatisfaction Barriers to integrationBarriers to integration

Why is “Integration” Why is “Integration” an Issue?an Issue?

Product ideas come from joint analysis of Product ideas come from joint analysis of markets and technologiesmarkets and technologies

Product planning requires Product planning requires market/marketing and technical inputsmarket/marketing and technical inputs

Market tracking (and feedback) of Market tracking (and feedback) of customer needs is critical to future customer needs is critical to future products/revsproducts/revs

R&D-marketing communication is difficultR&D-marketing communication is difficult

Here’s what engineers and Here’s what engineers and marketing people have to marketing people have to

say…say… Survey taken in 1985Survey taken in 1985 109 marketing managers and 107 R&D 109 marketing managers and 107 R&D

managers involved in new product managers involved in new product development in small- and medium-development in small- and medium-sized ($20M to $1B revenue) “research-sized ($20M to $1B revenue) “research-intensive” firmsintensive” firms

source: J. Prod Innov Manag 1985:2:12-source: J. Prod Innov Manag 1985:2:12-2424

Your main conclusions Your main conclusions from the survey from the survey

data……?data……?

Agreed Areas of “Most Agreed Areas of “Most Importance” (top 5)Importance” (top 5)

Marketing provides info on customer Marketing provides info on customer product reqmts, feedback on product product reqmts, feedback on product performance, and info on competitorsperformance, and info on competitors

Marketing involved in setting product Marketing involved in setting product goals and prioritiesgoals and priorities

R&D involved in designing products R&D involved in designing products according to market needsaccording to market needs

Areas of “Medium-Areas of “Medium-Importance” (middle 4)Importance” (middle 4)

Marketing involvement in screening new Marketing involvement in screening new product ideasproduct ideas

Marketing shares test-marketing results Marketing shares test-marketing results with R&Dwith R&D

Marketing finds commercial applications Marketing finds commercial applications of new product ideas and/or technologiesof new product ideas and/or technologies

R&D modifies products according to R&D modifies products according to marketing’s recommendationsmarketing’s recommendations

Areas of “Lesser Areas of “Lesser Importance” (bottom 4)Importance” (bottom 4)

Marketing involved in generating new Marketing involved in generating new product ideasproduct ideas

R&D involvement in screening new R&D involvement in screening new product ideasproduct ideas

R&D involvement in analyzing R&D involvement in analyzing customer needscustomer needs

Marketing involvement in product Marketing involvement in product development schedulesdevelopment schedules

Desired Integration……Desired Integration……Marketing Wants More Than Marketing Wants More Than

R&DR&D In 4 out of the 5 “most important” In 4 out of the 5 “most important” In 2 of the 4 “middle important” In 2 of the 4 “middle important” In 3 of the 4 “least important” In 3 of the 4 “least important” In only In only oneone category of 13 did R&D category of 13 did R&D

want more integration than marketing: want more integration than marketing: “involvement with marketing in “involvement with marketing in analyzing customer needs” analyzing customer needs”

Actual Integration…...Actual Integration…... Marketing thinks R&D is under-involvedMarketing thinks R&D is under-involved in in

developing/modifying products to market developing/modifying products to market needs and to marketing’s needs and to marketing’s recommendations (R&D does not perceive recommendations (R&D does not perceive as high a need for their involvement)as high a need for their involvement)

R&D thinks marketing provides insufficient R&D thinks marketing provides insufficient infoinfo on customer needs, customer on customer needs, customer feedback, and competitors (marketing feedback, and competitors (marketing somewhat, but not completely, disagrees)somewhat, but not completely, disagrees)

Actual Integration Actual Integration (cont’d)(cont’d)

Marketing thinks it’s more involvedMarketing thinks it’s more involved in in generating new product ideas, and generating new product ideas, and finding commercial applications for finding commercial applications for R&D’s ideas (than R&D thinks it is)R&D’s ideas (than R&D thinks it is)

Overall: Overall: both groups are dissatisfiedboth groups are dissatisfied with current integration, but with with current integration, but with different thingsdifferent things

Barriers to IntegrationBarriers to Integration(per the authors)(per the authors)

Role definitionsRole definitions Communication barriersCommunication barriers Insensitivity to others’ capabilities and Insensitivity to others’ capabilities and

perspectivesperspectives Lack of senior mgmt support/leadershipLack of senior mgmt support/leadership Personality and cultural differencesPersonality and cultural differences Lack of market knowledge (on both sides)Lack of market knowledge (on both sides) Objectives/measurement conflictsObjectives/measurement conflicts

Other BarriersOther Barriers ““soft” marketing vs. “hard” engineeringsoft” marketing vs. “hard” engineering

perspectives on “how hard it is” perspectives on “how hard it is”

different potential for “correctness”different potential for “correctness”

de jure vs. defacto “power”de jure vs. defacto “power”

short- vs. long-term focusshort- vs. long-term focus

Consider the HP-MPD Consider the HP-MPD case….case….

How is R&D measured?How is R&D measured?

How is Marketing measured?How is Marketing measured?

Who is responsible for overall Who is responsible for overall success (profits)?success (profits)?

Are there more appropriate Are there more appropriate measurements?measurements?

Topic for Next Class:Topic for Next Class:Sales (Distribution Sales (Distribution

Channels)Channels) How companies reach their customers: How companies reach their customers:

types of sales channels available types of sales channels available Rationale for choosing which sales Rationale for choosing which sales

channel(s) to usechannel(s) to use Issues in “managing” and serving sales Issues in “managing” and serving sales

channelschannels Impacts of channel choice on the design Impacts of channel choice on the design

of the “whole product”of the “whole product”

Readings for Next ClassReadings for Next Class

Going to MarketGoing to Market - read to understand - read to understand typestypes of sales channels and the of sales channels and the reasons reasons for choosing themfor choosing them

Lotus Development Corporation: Lotus Development Corporation: Channel ChoiceChannel Choice (case) (case)

Lotus’ Channel DecisionLotus’ Channel Decision Lotus 1-2-3 is the spreadsheet market Lotus 1-2-3 is the spreadsheet market

leader leader Lotus sells through distributors/dealers (d/d)Lotus sells through distributors/dealers (d/d) D/d will continue to be the primary channel D/d will continue to be the primary channel

for most of Lotus’ customers, but…..for most of Lotus’ customers, but….. Lotus is concerned that d/d may not be Lotus is concerned that d/d may not be

successful with large customerssuccessful with large customers Lotus is considering serving large customers Lotus is considering serving large customers

directly, bypassing the d/ddirectly, bypassing the d/d

Direct and Indirect Direct and Indirect SellingSelling

Lotus distributors dealers Large customers

Assignment QuestionsAssignment Questions Should Lotus establish a direct sales Should Lotus establish a direct sales

channel? If so, to which channel? If so, to which customers? customers? (be sure you are clear on the (be sure you are clear on the functions a direct channel would perform)functions a direct channel would perform)

Would direct selling have impacts on Would direct selling have impacts on the “whole product” design of 1-2-3?the “whole product” design of 1-2-3?

Before you start…...Before you start…... Evaluate Lotus’ financial performance; Evaluate Lotus’ financial performance;

do they have the financial capability do they have the financial capability to launch new efforts?to launch new efforts?

How big is Lotus’ market? What is How big is Lotus’ market? What is Lotus’ market share?Lotus’ market share?

What amount of revenue ($) is at What amount of revenue ($) is at issue in this decision?issue in this decision?

Guidance for Question 1…Guidance for Question 1… How are large customers How are large customers currentlycurrently served? served?

Who does selling? Who “fulfills” orders?Who does selling? Who “fulfills” orders? How much moneyHow much money do the dealers make, and do the dealers make, and

how? (do some price-margin calculations)how? (do some price-margin calculations) WhyWhy is Lotus considering this change? Are is Lotus considering this change? Are

there reasons other than those stated?there reasons other than those stated? What do the What do the customerscustomers want? want? Can Lotus make moneyCan Lotus make money selling directly to selling directly to

these customers? How?these customers? How?

Guidance for Question 2…Guidance for Question 2…

Are there changes in “Are there changes in “what businesswhat business Lotus is in” if it sells direct?Lotus is in” if it sells direct?

Are there Are there new functionsnew functions Lotus must now Lotus must now perform?perform?

What does Lotus need to do to What does Lotus need to do to make make moneymoney going direct? going direct?

Finally…..what impacts are there on the Finally…..what impacts are there on the product and “whole product”?product and “whole product”?