Tuesday afternoon

Marketing

What is Marketing?

• Marketing -- 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. – American Marketing Association’s official definition of marketing

Focus of Contemporary Marketing

• Marketing today involves helping the buyer buy through:

- Websites that help buyers find the best price, identify product features, and question sellers.

– Blogs and social networking sites that cultivate consumer relationships.

The Four Eras of Marketing

The Customer Relationship Era

• Customer Relationship Management (CRM) -- Learning as much as you can about customers and doing what you can to satisfy or exceed their expectations.

• Organizations seek to enhance customer satisfaction building long-term relationships.

• Disney

• Celebration

The Value of Customer Relationships

• On average, it costs over 10 TIMES more to acquire a new customer versus retain an existing one

• A 5% gain in customer retention can result in an 80% gain in profits.

MASS MARKETING vs. RELATIONSHIP MARKETING

• Mass Marketing -- Developing products and promotions to please large groups of people.

• Relationship Marketing-- Rejects the idea of mass production and focuses toward custom-made goods and services for customers.

KEYS to SUCCESSFUL RELATIONSHIP MARKETING

• Effective relationship marketing is built on:

• Open communication

• Consistently reliable service

• Staying in contact with customers

• Trust, honesty, and ethical behavior

• Showing that you truly care

The Marketing Environment

The Four P’s of Marketing

• Product• Pricing• Place (Distribution)• Promotion

Product

DEVELOPING a TOTAL PRODUCT

• Total Product Offer -- Everything consumers evaluate when deciding whether to buy something

• Products are evaluated on many different dimensions, both tangible and intangible.

• Marketers must think like and talk to consumers to find out what’s important.

POTENTIAL COMPONENTS of a TOTAL PRODUCT OFFER

Product Mix and Product Line

• Product Mix -- The combination of all product lines offered by a manufacturer or service provider.

• Product Line -- A group of products that are physically similar or intended for a similar market.

Disney’s Product Mix and Product Lines

Types of Consumer Products

ConvenienceProduct

ConvenienceProduct

ShoppingProduct

ShoppingProduct

SpecialtyProduct

SpecialtyProduct

UnsoughtProduct

UnsoughtProduct

A relatively inexpensive item that merits little shopping effort. (candy)

A relatively inexpensive item that merits little shopping effort. (candy)

A product that requires comparison shopping, because it is usually more expensive and found in fewer stores. (appliances)

A product that requires comparison shopping, because it is usually more expensive and found in fewer stores. (appliances)

A particular item that consumerssearch extensively for and are reluctant to accept substitutes. (Lamborghini)

A particular item that consumerssearch extensively for and are reluctant to accept substitutes. (Lamborghini)

Products the consumer is not knowledgeable about or aware of, may even have a negative interest. (car-towing service)

Products the consumer is not knowledgeable about or aware of, may even have a negative interest. (car-towing service)

The New Product Development Process

The Four Stages of the Product Life Cycle

• Product Life Cycle -- A theoretical look at what happens to sales and profits for a product over time.

• Product Life Cycle Stages:

1. Introduction

2. Growth

3. Maturity

4. Decline

SALES and PROFITS DURING the PRODUCT LIFE CYCLE

Marketing Strategies for PLC

Introductory Growth Maturity Decline

Product Limited offerings, frequent changes

More offerings, product is modified

Many models, often customized for niche markets

Models are phasedout, eliminated

Distribution Limited, few outlets More outlets Wide distribution Distribution decreases

Price High Prices begin to fall Priced continue to decrease

Prices fall to low levels

Promotion Focused on product awareness, information, strong use of personal selling

Brand focused to differentiate from increased competition, advertising increases

Promotions more focused on price(coupons, rebates, etc.) and advertising

Promotion stops

Sales Low Rapidly increasing Max. sales reached Declining

Costs High Decreasing Low (econ. of scale) Low

Profits (Loss) Break even, low profits High profits Declining/gone

Customers Innovators Early Adopters, early majority

Early Majority, Late Majority

Laggards

Competitors Few Increasing competition Many, entrants decreasing

Few, most leave market

Differentiating Products

• Product Differentiation -- The creation of real or perceived product differences.

• Marketers use a mix of pricing, advertising and packaging to create different images.

SOME KEY FUNCTIONS of PACKAGING

• To attract buyers’ attention

• Protect the goods inside and be tamperproof

• Describe and provide information about the product

• Explain the product’s benefits

• Provide warranty information and warnings

• Give an indication of price, value, and uses

Understanding Branding

• Brand -- Name, symbol, or design that identifies the goods or services and distinguishes them from competitors’ offerings.

• Brand Equity – The combination of factors (awareness, loyalty, perceived quality, images, and emotions) that people associate with a brand name. How much $$ is the brand name worth??

• Brand Loyalty -- The degree to which consumers are satisfied and are committed to further purchases.

Building Brand Awareness

• Brand Awareness -- How quickly or easily a given brand name comes to mind when someone mentions a product category.

• Consumers reach a point of brand preference when they prefer one brand over another. Coke over Pepsi

• When consumers reach brand insistence, they will not accept substitute brands. Pizza at the shore – only from Mack and Manco’s!

Brand Associations

• Brand Association -- Linking a brand to other favorable images, like celebrities or a geographic area. Tiger Woods??

• Brand Manager -- Person responsible for a particular brand and handles all the elements of the brand’s marketing mix.

Price

Pricing Objectives

• Achieving a target return on investment or profit

• Building traffic

• Achieving greater market share

• Creating an image

• Furthering social objectives both short-run and long-run

Pricing Strategies

• Cost-based pricing measures cost of producing a product including materials, labor, and overhead.

• Target Costing -- Making the final price of a product an input in the product development process by estimating the selling price consumers will pay. example

• Competition-Based Pricing -- A strategy based on what the competition is charging for its products.

Using Breakeven Analysis

• Break-Even Analysis -- The process used to determine profitability at various levels of sales. The break-even point is where revenues equals cost.

• Total Fixed Costs -- All costs that remain the same no matter how much is produced or sold.

• Variable Costs -- Costs that change according to the level of production.

• Example

Breakeven Example

• Selling price = $9 per unit• Variable costs = $5 per unit• Fixed Costs = $32,000• How many units must be sold to breakeven?• Units = FC/(SP/unit-VC/unit)• $32,000/($9-5) = 8,000 units

Pricing Alternatives• Skimming Price Strategy -- Pricing new products high to recover

costs and make high profits while competition is limited.

• Penetration Price Strategy -- Pricing products low with the hope of attracting more buyers and discouraging other companies from competing in the market.

• Everyday Low Pricing (EDLP) -- Setting prices lower than competitors with no special sales.

• High-Low Pricing -- Using regular prices that are higher than EDLP except during special sales when they are lower.

• Psychological Pricing -- Pricing products at price points that make a product seem less expensive than it is. $47 or $1.99

Place

Marketing Intermediaries

• Marketing Intermediaries -- Organizations that assist in moving goods and services from businesses to businesses (B2B) and from businesses to consumers (B2C).

• They are called intermediaries because they’re in the middle of a series of firms that distribute goods.

Why Use Marketing Intermediaries?

• Intermediaries perform marketing tasks faster and cheaper than most manufacturers could provide them.

• Marketing intermediaries make markets more efficient by reducing transactions and contacts.

Types of Marketing Intermediaries

• Agents and Brokers -- Intermediaries who bring buyers and sellers together and assist in negotiating an exchange but do not take title to the goods they offer.

• Wholesaler -- An intermediary that sells products to other organizations such as retailers, manufacturers, and hospitals.

• Retailer -- An organization that sells products to ultimate customers.

Channels of Distribution

• A group of marketing intermediaries that join together to transport and store goods from producers to consumers.

Examples of Channels of Distribution

Distribution’s Effect on your Food Dollar

Key Facts about Intermediaries

• Marketing intermediaries can be eliminated but their activities can’t.

• Intermediaries perform marketing functions faster and cheaper than other organizations can.

• Marketing intermediaries add costs to products but they’re generally offset by the values they provide.

Intermediaries Help Overcome Discrepancies

1.Quantity: amount produced and amount end user wants to buy

2.Assortment: may not have the variety of all products a consumer wishes to buy

3.Time: product is produced at a different time than the customer wants

4.Space: product is produced in a different place than the consumer wants to buy

Marketing Channel Members Add Value

Safeway Grocery Store

Kellogg’s

PostNabiscoConsumer

Consumer

Consumer

•Quantity•Assortment•Time•Space

How Intermediaries Enhance Efficiency

Types of Retail StoresTypes Examples

Department Store Sears, JC Penney, Nordstom

Discount Store Wal-Mart, Target

Supermarket Safeway, Kroger, Albertson’s

Warehouse Club Costco, Sam’s Club

Convenience Store 7-Eleven

Category Killer Toys-R-Us, Bass Pro Shops, Office Depot

Outlet Store Nordstrom Rack, TJ Maxx, Nike Outlet

Specialty Store Jewelry store, shoe stores, bicycle shops

Non-store Retailing

• Electronic Retailing -- Selling goods and services to ultimate consumers over the Internet.

• Telemarketing -- The sale of goods and services via the telephone.

• Vending machines, kiosks, and carts dispense convenience goods when consumers deposit sufficient funds.

Non-store Retailing, 2• Direct Selling -- Selling goods and services to customers in their homes or workplaces.

Mary Kay Cosmetics

• Multilevel marketing uses salespeople who work as independent contractors.

• Direct Marketing -- Any activity that directly links manufacturers or intermediaries with ultimate customers. Direct marketing is a sub-discipline and type of marketing. There are two main definitional characteristics which distinguish it from other types of marketing. The first is that it attempts to send its messages directly to consumers, without the use of intervening media. This involves commercial communication (direct mail, e-mail, telemarketing) with consumers or businesses, usually unsolicited. The second characteristic is that it is focused on driving a specific "call-to-action." This aspect of direct marketing involves an emphasis on trackable, measurable positive (but not negative) responses from consumers (known simply as "response" in the industry) regardless of medium.

Supply Chain

• Supply Chain -- All the linked activities various organizations must perform to move goods and services from the source of raw materials to ultimate consumers.

• Supply Chain Management -- The process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all the organizations in the supply chain.

The Supply Chain

Logistics

• Logistics -- The planning, implementing and controlling of the physical flow of material, final goods and related information from points of origin to points of consumption.

• Firms may outsource to companies specializing in trade compliance to determine what is needed to market products to global customers.

Logistics Applications

• Inbound Logistics -- Brings raw materials, packaging, other goods and services and information from suppliers to producers.

• Materials Handling -- Movement of goods within a warehouse, from warehouse to the factory floor and from the factory floor to workstations.

• Outbound Logistics -- Manages the flow of finished products and information to business buyers and consumers.

• Reverse Logistics -- Brings goods back to the manufacturer because of defects or for recycling.

Comparing Transportation Modes

Mode Cost Speed Dependability Flexibility Frequency Reach

Rail Med. Slow Medium High Low High

Trucks High Fast High Medium High Highest

Pipeline Low Medium Highest Lowest Highest Lowest

Ships Lowest Slowest Lowest Highest Lowest Low

Air Highest Fastest Low Low Medium Medium

Breakdown of Distribution ModesTABLE 1 Domestic and International U.S. Freight Shipments by Tons and Value for 1998, 2010, 2020.

Mode Tons Value

(millions) (billions $)

1998 2010 2020 1998 2010 2020

Domestic Air 9 18 26

545 1,308 2,246 Highway 10,439 14,930 18,130 6,656 12,746 20,241 Rail 1,954 2,528 2,894 530

848 1,230 Water 1,082 1,345 1,487 146

250 358 Total, Domestic 13,484 18,820 22,537 7,876 15,152 24,075

Warehousing

• Storage warehouses hold products for a relatively long period of time.

• Distribution warehouses are used to gather and redistribute products such as:

- Package deliveries (FedEx)

Promotion

Promotion

• Communication that informs, persuades, and reminds potential buyers of a product to influence an opinion or elicit a response.

Informative Objective

• Increase awareness

• Explain how product works

• Suggest new uses

• Build company image

Persuasion Objective

• Encourage brand switching

• Change customers’ perception of product attributes

• Influence buying decision

• Persuade customers to call

Reminder Objective

• Remind customers that product may be needed

• Remind customers where to buy product

• Maintain customer awareness

Promotion in an Organization• Promotion Mix -- The combination of

promotional tools an organization uses; the traditional mix includes:

Integrated Marketing Communication

• Integrated Marketing Communication (IMC) -- Combines the promotional tools into one comprehensive strategy. IMC is used to:

- Create a positive brand image.

- Meet the needs of consumers.

- Meet the strategic marketing and promotional goals of the firm.

Steps in a Promotional Campaign

1. Identify a target market

2. Define objectives

3. Determine a promotional budget

4. Develop a unifying message

5. Implement the plan

6. Evaluate the plan

Advertising

• Advertising -- Paid, non-personal communication through various media by organizations and individuals who are in some way indentified in the message.

ADVERTISING EXPENDITURE by MEDIA in $ MILLIONS

Rank MediaProjected 2008 Spending

% of Total Ad Spending

1 Direct Mail $63,732 21.6

2 Broadcast TV 48,300 16.4

3 Newspaper 42,147 14.3

4 Cable TV 21,718 7.4

5 Radio 18,635 6.3

6 Yellow Pages 14,705 5.0

7 Consumer Magazine 14,106 4.8

8 Internet 12,722 4.3

Other 58,311 19.8

Total 294,376 100.0

Advertising• TV advertising is still a dominant media.

• Apple’s 1984 commercial

• Digital Video Recorders (DVRs) challenge TV advertising because viewers can skip them.

• Product Placement -- Advertisers pay to put their products into TV shows and movies where the audience will see them.

• The Greatest Movie Ever Sold

Personal Selling

• Personal Selling -- The face-to-face presentation and promotion of a product, including the salesperson’s search for new prospects and follow-up service.

• Salespeople need to listen to customer needs, help reach a solution and do everything possible to make the transaction as simple as possible.

Prospecting and Qualifying

• Prospecting -- Researching potential buyers and choosing those most likely to buy.

• Qualifying -- Making sure customers have a need for a product, the authority to buy and the willingness to listen to a sales message.

Steps in the Selling Process

Using Public Relations

• Public Relations (PR) -- Evaluates public attitudes, changes policies and procedures in response to the public, and executes a program of action and information to earn public understanding and acceptance.

• 3 steps of a good PR program:

1. Listen to the public

2. Change policies and procedures

3. Inform people you’re responsive to their needs

Publicity (not same as PR)

• Publicity -- Any information about an individual, product or organization that’s distributed to the public through the media and is not paid for or controlled by the seller.

• Advantages of Publicity:

• Free

• Reaches people who would not look at an advertisement

• More believable than advertising

Disadvantages of Publicity

• No control over whether the media will use a story or when they may release it.

• It can be good or bad.

• Once a story has been run, it isn’t likely to run again.

Sales Promotions• Sales Promotion -- The promotional tool that stimulates consumer

purchasing and dealer interest by means of short-term activities.

• Examples of Consumer Promotions:• Coupons

• Demonstrations

• Sampling

• Sweepstakes

• In-store Displays

• Contests – free t-shirt

Other Promotional Techniques• Word-of-Mouth Promotion -- People tell others about products they

have purchased.

• Groupon, LivingSocial

• Groupon Philadelphia – today’s deal

• Viral Marketing -- Paying customers to say positive things on the Internet or setting up multiple selling schemes whereby consumers get commissions.

• Top Viral video ads

– Top viral videos of all time

• People who promote through viral marketing often receive SWAG which can include free tickets, shirts, and other merchandise.

Internet-based promotions

• Blog -- Short for web log; an online diary that looks like a webpage but is easier to create and update by posting text, photos, videos, or links blogger.com

• Video blogging (vlogging) is the latest – easy to do

• Podcasting -- A way to distribute audio and video programs via the Internet.

• Email promotions increase brand awareness among commercial suppliers.

Push versus Pull Strategy• Pull Strategy

Manufacturer

Retailer

Consumer

• Push Strategy

Manufacturer

Retailer

Consumer

Manufacturer markets to the

consumer through advertising, sales promotions, etc.

Consumer demands product from the retailer

(pulls)

Retailer demands product from the

manufacturer (pulls)

Push and Pull strategies can be used separately or together

Retailer passes along (pushes)

these incentives in some way to the

consumer

Manufacturer offers promotions

to the retailer (discounts, increased

personal selling, etc.)

Some of my Favorite Commercials

• Jordan 1, Jordan 2• Tiger Woods• Seat Belt• Coke• Google in Paris• Mac 1984• Apple Think Different• P&G• Evian• Sound of Music (publicity for a reality show)• Top 10 viral ads of all time

Marketing Research

• Marketing Research -- Analyzing markets to determine challenges and opportunities, and finding the information needed to make good decisions.

• Research is used to identify products consumers have used in the past and what they want in the future.

• Research uncovers market trends and attitudes held by company insiders and stakeholders.

Marketing Research, 2

• Marketing Research helps us:– Assess Market Potential (Target Market Selection)– Explore what Product/Service Offerings Customers

Want– Develop New Products– Develop Effective Promotional Strategies– Determine price points– Measure Existing Customer Satisfaction– Monitor the External Environment

Four Steps in the Marketing Research Process

1. Defining the problem or opportunity and determining the present situation.

2. Collecting research data.

3. Analyzing the data.

4. Choosing the best solution and implementing it.

Secondary versus Primary Data

• Secondary data has been previously collected by someone else.

• Primary data is data you collect yourself for your own study.

Sources of Secondary Data

Government Agencies

Trade and Industry Associations

Marketing Research Firms

Commercial Publications

News Media

Internal Corporate Information

Internet Search Engines/Directories

Advantages of Secondary Data

• Saves time and money

• Aids in determining direction for primary data collection

• Pinpoints the kinds of people to approach

• Serves as a basis of comparison for other data

Disadvantages of Secondary Data

• May not be on target with the research problem (info may not be what researcher is exactly looking for)

• Quality and accuracy of data may pose a problem– Who gathered the data?– What method was used?– When was the information gathered?– How were the classifications developed?

Key Benefits of Marketing Research

• Analyze customer needs and satisfaction.

• Analyze current markets and opportunities.

• Analyze the effectiveness of marketing strategies.

• Analyze marketing process and tactics currently used.

• Analyze the reasons for goal achievement or failure.

• Using Marketing Data to Predict Life Span

Consumer and B2B Markets

• Consumer Market -- All the individuals or households that want goods and services for personal use and have the resources to buy them.

• Business-to-Business (B2B) -- Individuals and organizations that buy goods and services to use in production or to sell, rent, or supply to others.

Segmenting the Consumer Market

• Geographic Segmentation -- Dividing the market by cities, counties, states, or regions.

• Demographic Segmentation -- Dividing the market by age, income, education, and other demographic variables.

• Psychographic Segmentation -- Dividing the market by group values, interests, and opinions. http://www.claritas.com/MyBestSegments/Default.jsp

Segmenting, part 2

• Benefit Segmentation -- Dividing the market according to product benefits the customer prefers.

• For auto company – safety, environment, looks, speed, handling, size, etc.

• Volume (Usage) Segmentation -- Dividing the market by the volume of product use.

The CONSUMER DECISION MAKING PROCESS AND OUTSIDE INFLUENCES