Chapter 1: An Overview of Marketing

Copyright 2010 by Cengage Learning Inc. All Rights Reserved 1

What is Marketing?

What is Marketing?

• A Philosophy

• An Attitude

• A Perspective

• A Management Orientation

A Set of Activities

• Products

• Distribution

• Promotion

• Pricing

AMA: 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.

Exchange

At Least Two Parties

Something of Value

Communication and Delivery

Freedom to Accept or Reject

Desire to Deal with Other Party

Conditions for Exchange

People giving up

something to receive something they would

rather have.

What is Marketing?

Product

Price

Place

Promo

tion

ExchangeA B

Deliverin

g

Value

Communicating

Value

CreatingValueCustomer value

and beneficial relationships

Customer valueand beneficial relationships

The Four Marketing Management Philosophies

Production

Sales

Marketing

Societal

What can we make or do best?

How can we sell more aggressively?

What do customers want and need?

What do customers want and need, and how can we benefit society?

Orientation Focus

Achieving a Marketing Orientation

Obtain information about customers, competitors, and markets

Examine the information from a total business perspective

Determine how to deliver superior customer value

Implement actions to provide value to customers

Customer Value Requirements

Offer products that perform

Earn trust

Avoid unrealistic pricing

Give the buyer facts

Offer organization-wide commitment in service and after-sales support

Co-Creation

Sales vs. Marketing Orientations

Organization’sFocus

Firm’sBusiness

ForWhom?

Primary Profit Goal?

Tools to Achieve

Selling goods and services

Everybody Maximum sales volume

Primarily promotion

InwardSales

Orientation:

Market Orientation

:

Outward Coordinated use of all marketing activities

Customer satisfaction

Specific groups of people

Satisfying wants and needs

Why Study Marketing?

Why Study Marketing?

Plays an important role in society

Vital to business survival, profits and growth

Offers career opportunities

Affects your life every day

Chapter 2: Strategic Planning for Competitive Advantage

Copyright 2012 by Cengage Learning Inc. All Rights Reserved 12

The Nature of Strategic Planning

Understand the importance of strategic marketing

and know a basic outline for a marketing plan.

Strategic Planning

The managerial process of creating and maintaining a fit between the

organization’s objectives and resources and evolving market opportunities.

The goal is long-term profitability and growth.

Why Write a Marketing Plan?LOI

• Provides a basis for comparison of actual and expected performance

• Provides clearly stated activities to work toward common goals

• Serves as a reference for the success offuture activities

• Provides an examination of the marketing environment

• Allows entry into the marketplace with awareness

Marketing Plan Elements

Defining the Business Mission

• Answers the question, “What business are we in?”

• Focuses on the market(s) rather than the good or service

• Strategic Business Units (SBUs) may also have a mission statement

Southwest Airlines Mission Statement

Source: http://www.southwestairlines.com/about_swa/mission

Strategic Business Units (SBUs)

Characteristics:An SBU HAS…

• A distinct mission and specific target market

• Control over its resources• Its own competitors• Plans independent of other SBUs

SWOT Analysis

©South-Western College Publishing

SSWWOOTT

Things the company does well.Things the company does well.

Things the company does not do well.Things the company does not do well.

Conditions in the external environment that favor strengths.Conditions in the external environment that favor strengths.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Internal

External

Scanning the Marketing Environment

The process of continually acquiring/interpreting info on the events occurring outside the organization to identify and interpret potential trends.

Scanning the Marketing Environment

Marketing Objectives

Realistic

Measurable

Time specific

Compared to a benchmark

“Our objective is to increase sales of Purina

brand cat food by 15 percent over 2009 sales of

$300 million.”

Criteria for Good Marketing Objectives

Realistic, measurable, and time-specific objectives consistent with the firm’s objectives:

1. Communicate marketing management philosophy

2. Provide management direction

3. Motivate employees

4. Force executives to think clearly

5. Allow for better evaluation of results

Competitive Advantage

Niche StrategiesNiche Strategies

CostCost

Product/Service Differentiation

Product/Service Differentiation

Types of Competitive Advantage

Types of Competitive Advantage

The set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition.

Cost Competitive AdvantageBeing the low-cost competitor in an industry while maintaining satisfactory profit margins.

Obtain inexpensive raw materials

Create efficient plant operations

Design products for ease of manufacture

Control overhead costs

Avoid marginal customers

Sources of Cost Reduction

Experience CurvesExperience Curves

Efficient LaborEfficient Labor

No-frills Goods and Services

No-frills Goods and Services

Government SubsidiesGovernment Subsidies

Product DesignProduct Design

ReengineeringReengineering

Production InnovationsProduction Innovations

New Service Delivery Methods

New Service Delivery Methods

Product/Service Differentiation

• The provision of something that is unique and valuable to buyers beyond simply offering a lower price than the competition’s.– Brand names– Strong dealer network– Product reliability– Image– Service

Niche Competitive Advantage

• Used by small companies with limited resources

• May be used in a limited geographic market

• Product line may be focused on a specific product category

Sources of Sustainable Competitive Advantage

PatentsPatents

CopyrightsCopyrights

LocationsLocations

EquipmentEquipment

TechnologyTechnology

Customer ServiceCustomer Service

PromotionPromotion

Skills and Assets

of an

Organization

Skills and Assets

of an

Organization

Sources of Competitive Advantage

Sources ofCompetitive Advantage

Sources ofCompetitive Advantage

Cost$

Cost$

Product/ServiceDifferentiationA vs. B vs. C

Product/ServiceDifferentiationA vs. B vs. C

NicheStrategies

NicheStrategies

STRATEGY

Ansoff’s Strategic Opportunity Matrix

Present Product New Product

New Market

MarketPenetration

MarketDevelopment

ProductDevelopment

Diversification

Present Market

Strategic Alternatives

MarketPenetration

MarketDevelopment

Product Development

Diversification

Increase market share among existing customers

Attract new customers to existing products

Introduce new products into new markets

Create new products for present markets

Setting Strategic Direction

1. Where are we now?2. Where do we want to go?

Setting Strategic Direction – Where are we now?

• Customers• Competencies• Competitors• Business sectors• SWOT analysis• Environmental scanning

Setting Strategic Direction – Where are we now?

• Competencies – an organization’s special capabilities, including skills, technologies, and resources that distinguish it from other organizations

• Competitive advantage – a unique strength relative to competitors, often based on quality, time, cost, or innovation

• Benchmarking – discovering how others do something better than your own firm, so you can imitate or leapfrog competition. Studying operations in completely different businesses.

Setting Strategic Direction – Where do we want to go?

• Growth strategies1. Portfolio analysis

– Market growth rate versus market share

2. Market-Product analysis

– Analyze current and new products and markets

Critical Factors for Success

• Customer relationships (value)• Innovation (new and unique value)• Quality• Efficiency

Strategic Marketing ProcessThe activities of selecting and describing one or more target markets and developing and maintaining a market mix that will produce mutually satisfying exchanges with target markets.

Target Market Strategy

• Segment the market based on groups with similar characteristics

• Analyze the market based on attractiveness of market segments

• Select one or more target markets

Target Market Strategy

Appeal to the entire market with one marketing mix

Appeal to the entire market with one marketing mix

Concentrate on one marketing segment

Concentrate on one marketing segment

Appeal to multiple marketswith multiple marketing mixes

Appeal to multiple marketswith multiple marketing mixes

Segmentation• Defining markets• Dimensions to use• Identifying segments• Identifying segments to target• Segmentation approaches

Positioning• Understanding customer’s view• Positioning techniques• Evaluating segment preferences• Differentiating the marketing mix• Relationship between positioning & targeting

Focusing Marketing Strategy with Segmentation and Positioning

Market Segmentation

• Involves aggregating prospective buyers into groups that– Have common needs, and– Will respond similarly to a marketing

action

Product Segmentation

• Using different marketing mix activities (features and advertising) to demonstrate perceive differences against competing products/brands

• A firm selling two or more products with different features targeted to different market segments.– Good – Better – Best – Cost – Value – Premium

5 Steps to Segmenting Markets

• Form prospective buyers into segments

• Form products to be sold into groups• Develop a market product grid and

estimate size of market• Select target markets• Design marketing activities to each

target market

Criteria for Forming Segments

• Potential for increased profit/ROI• Similarity of needs• Difference of needs• Feasibility of marketing action to

reach the targeted segment• Simplicity of cost of assigning

potential buyers to a segment

Ways to Segment Consumer Markets

• Customer Characteristics– Geographic– Demographic– Socioeconomic– Psychographic

• Buying Situations– Outlet type– Benefits sought– Usage– Awareness and intentions– Behavior

Ways to Segment Consumer Markets

Broad product-market (or generic market) name goes here (The bicycle-riders product-market)

Submarket 1(Exercisers)

Submarket 2(Off-road

adventurers)

Submarket 3(Transportation riders)

Submarket 4(Socializers)

Submarket 5(Environmentalists)

Market Segmentation Defines Possible Target Markets

Behavioral dimensions for segmenting consumer markets• Benefits sought• Thoughts• Rate of use• Type of problem solving• Rate of use• Information required• Brand familiarity• Purchase relationship• Kind of shopping• Needs

Segmenting business markets

• Kind of relationship• Purchasing methods• Type of customer• Segmentation• Type of buying situation• How customers will use the product

Marketing Mix – 4P’s

Marketing Mix: The “Four Ps”

The starting point of the

“4 Ps”

Includes Physical unit Package Warranty Service Brand Image Value

Product

Products can be… Tangible goods Ideas Services

Marketing Mix: The “Four Ps”

Product availability where and when customers want them

All activities from raw materials to finished products

Ensure products arrive in usable condition at designated places when needed

Place

Marketing Mix: The “Four Ps”

Promotion Role is to bring about

exchanges with target markets by:

Informing Educating Persuading Reminding

Includes integration of:

Personal selling

Advertising

Sales promotion

Public relations

Marketing Mix: The “Four Ps”

Price Price is what a buyer must

give up to obtain a product.

The most flexible of the “4 Ps”-- quickest to change

Competitive weapon

Price x Units Sold = Total Revenue

Strategic Marketing Process

Following Up the Marketing Plan

• Implementation

• Evaluation

• Control

• Marketing audit is…• Comprehensive• Systematic• Independent• Periodic

Effective Strategic Planning

• Effective Strategic Planning requires…

• Continual attention – ongoing rather than annual

• Creativity – challenging

assumptions

• Management Commitment – support and participation from the top

Chapter 3: Ethics and Social Responsibility

Civil Society

Six Modes of Social Control

Ethics

Laws

Formal and Informal Groups

Self Regulation

The Media

Active Civil Society

Ethical Behavior

63

EthicsEthics

The moral principles or values

that generally govern the

conduct of an individual.

People usually base their individual choice of ethical theory on their life experiences• Deontology• Utilitarianism• Casuist• Moral Relativists• Virtue Ethics

Ethical Decision Making

Influential Factors

Extent of Problems

Top Management Actions

Potential Consequences

Social Consensus

Probability of Harm

Time UntilConsequences

Number Affected

Code of Ethics

Code of Ethics- A guideline to helpmarketing managers and other

employees make better decisions.

Creating Ethical Guidelines

• Helps identify acceptable business practices

• Helps control behavior internally

• Avoids confusion in decision making

• Facilitates discussion about right and wrong

Ethical Guidelines and Training

Exhibit 3.3

Arguments for Social Responsibility

Corporate Social Responsibility

Stakeholders

Employees

Management

Customers

Local Community

Suppliers

Owners

Sustainability

70

The idea that socially responsible companies will

outperform their peers by focusing on the world’s social

problems and reviewing them as opportunities to build

profits and help the world at the same time.

Cause-Related Marketing

The cooperative efforts of a “for-profit” firm and a “non-profit” organization for mutual benefit.

“Five Questions to Ask Before Participating in a Cause-Related Marketing Program”• Is this company committed?• How is the program structured?• Who does the program benefit?• How will the organization that benefits use my money?• Is the program meaningful to me?