Marketing in action

02/18/15 [email protected] 1

Marketing in action

A Managerial Approach


Some Perspective

Marketing and History

“In well-ordered states, storekeepers and salesmen are commonly those who are weakest in bodily strength and, therefore, of little use for any other purpose.” - Plato

“Merchants are to be accounted vulgar; for they can make no profit except by a certain amount of falsehood.” - Cicero

“Advertising ... is a meretricious endeavor in which psychological appeals to ‘fear’ and ‘shame’ are developed to bamboozle the public into purchasing essentially worthless packaged goods at bloated prices.” - Thorstein Veblen


Some Perspective

A Modern View

“Corporate leaders nationwide are discovering that their most powerful competitive weapon is marketing -- the development, pricing, distribution, and promotion of products.” - Newsweek

“Marketing is now central to success at any company in any business, and it is going to make the difference between winners and losers.” - Stephen Greyser, Harvard Business School

“Stop being a company with its face towards the CEO and back towards the customer” -Jack Welch, CEO, G.E.


Marketing challenges

1. Destabilization due entrepreneurial freedom2. The MNC onslaught3. The all pervasive competition4. The exacting demands of a buyer’s market5. Compulsions to go global6. Challenges on technology front7. Need for quick product innovations8. Challenges of achieving marketing excellence under

conditions of discontinuity


Key Issues in the Business Environment

Customer Satisfaction - markets are saturated and we cannot rely on pent up demand to make profits. Must provide greater quality and value to smarter shoppers. From mass marketing to segments of one. Increase speed of innovation, diffusion and distribution.

Globalization Global brands, different positioning or similar positioning in

different countries? New ideas developed in country A, designed in country B,

manufactured in country C and sold in country D. Environmental and Health Care Concerns

Must address concerns of better educated and better informed consumers.


Misconceptions of MarketingMisconceptions of Marketing

Marketer create needs, manipulate people to buy something they don't want

Marketing = selling = advertising Marketing = shoes polishing Customer will favour those products that offer the most

quality, performance & innovative feature


Marketing Is Important!

Marketing impacts all of us in our lives as consumers Gives us choices Stimulates innovation and economic growth

There are many good job opportunities in marketing Regardless of what career path you take, no firm (or non-

profit organization) survives for long if it can’t satisfy some group of customers.

1-5


What is Marketing ? (1)

A social & managerial process by which individuals & groups obtain what they need & want through creating & exchanging values with others

Marketing ( management ) is the process of planning & executing the production, pricing, promotion & distribution of ideas, goods & services to create exchange that satisfy individual & organizational goals. ( integrated marketing activities)


What is Marketing ? (2)

Key function of management : provide MR inputs & guiding philosophy on company

mission & strategic planning


Customer Management Footprint


Why the change over the ages?

Changing approaches to business over time the production concept the product concept the sales concept the marketing concept

Why is Marketing one of the most critical components of modern

business?


Production concept

Based on •Cost benefit

•Mass distribution

Product concept Based on•Quality

•Performance•Innovation •Focus on

•Product •Marketing myopia

Selling concept

Based on •Consumer inertia and resistance

•Aggressive selling and

promotions to stimulate more

buying

Marketing concept 1950 shift from

make and sell to “sense and respond”Based on•Creating •Delivering

•Communicating Superior customer value to

chosen target markets


FactoryExistingProducts

Sellingand

Promoting

ProfitsthroughVolume

MarketCustomer

NeedsIntegratedMarketing

Profitsthrough

Satisfaction

The Selling ConceptThe Selling Concept

The Marketing ConceptThe Marketing Concept

StartingPoint

Focus Means Ends

Marketing & Sales Concept Contrasted


Society(Human Welfare)

Society(Human Welfare)

Consumers(Satisfaction)

Consumers(Satisfaction)

Company(Profits)

Company(Profits)

SocietalMarketingConcept

SocietalMarketingConcept

The Societal Marketing Concept


ProductsNeeds, wants,and demands

Exchange, transactions,and relationships

Markets

CoreMarketingConcepts

CoreMarketingConcepts

Value, satisfaction,and quality

Core Concepts


Needs Wants Demands Transactions/Exchange/Relationships Market

Marketing Problem: Needs & Wants


customer

•To understand the customer –basic is to know that s/he is buying / using the products as a means to solve or address their own problem, reason and strategy and not yours and therefore unless marketer is customer specific in terms of marketing mix elements, success is usually evasive.

•Customer does not buy a brand s/he buys their perception, and choose a brand which offers the best solution to their problem

•Marketers only brief is to synergize the capabilities of the organization so as to address customer’s specific needs.


Changes in customer perceptions

1950-60 60’s early 70’s Late 70’s early 80 Late 89’s –90’s

Mass market

Segmentedperception Sub segments niche

Customer perceived as

As a mass audienceGeneral/similar needsLimited product offering

Limited No. of Needs-price featureLimited tiring of products

Growing no. of needsPrimarily in lower

SegmentsMore market offerings

Portfolio of nicheproducts


Perspective (A mental view of a scene)

SET OF PERSPECTIVES IN CONSUMER BEHAVIOR

MARKETER CONSUMER PUBLIC POLICY

MAKETERS AND CONSUMERS ARE ACTIVE ON DAILY BASIS

MARKETING DECISIONS

CONTROLLABLE (4P’s) UNCONTROLABLE (5C’s)

Marketing mixelements

Customers Channels Conditions Competitors

Company,


Realistic view

This realistic view is important to the marketer because ,

1. It gives an external view of th e cus tomer.

2. An agg regate view of the cus tomer

3. A p roduc t s pecific view of the cus tom er

4. A b rand preferenc e /purch as e point of view

5. A b eh avioral influenc e orientation

• who does or does not us e th e p roduc t

• Who uses th e c om petitors Brand


Comparison of two perspectives

Perspective Perspective characteristicscharacteristics

Marketer’s Marketer’s perspective perspective

Customer’s Customer’s perspectiveperspective

Point of view Point of view External External (buyers)(buyers)

InternalInternal(me)(me)

Level of interestLevel of interest AggregateAggregate(markets)(markets)

IndividualIndividual(myself)(myself)

Scope of interestScope of interest Product specificProduct specific(what I make)(what I make)

Across productsAcross products(what I buy)(what I buy)

correct choice correct choice Brand specificBrand specific(my brand)(my brand)

Best alternativeBest alternative(best brand for me)(best brand for me)

Role of influenceRole of influence Influence Influence behaviorbehavior

Handle behavioralHandle behavioralinfluencesinfluences


Perspectives-contd. customercustomer marketermarketerMost behaviors are internally focused –we Most behaviors are internally focused –we think silently-observe privately-& evaluate think silently-observe privately-& evaluate according to our own dictatesaccording to our own dictates

Marketer can only have an external view.Marketer can only have an external view.

Focus on themselves as individualsFocus on themselves as individuals Market segmentation as a process of Market segmentation as a process of comprehending markets. Marketers try to comprehending markets. Marketers try to find sub markets within the total markets find sub markets within the total markets for economic viability.for economic viability.

Not an expert for many of their purchasesNot an expert for many of their purchases An expert for his brand / categoryAn expert for his brand / category

Choose only one brand from a given set, Choose only one brand from a given set, meaning , making a wrong choice from the meaning , making a wrong choice from the point of view of every marketer but, one.point of view of every marketer but, one.(branding helps)(branding helps)

Best brand is the one that we make Best brand is the one that we make (building brand equity helps)(building brand equity helps)

someTime and effort required to react to someTime and effort required to react to stimuli. (only if it is interest to me stimuli. (only if it is interest to me otherwise ignored)otherwise ignored)

Targeting markets of interest. Targeting markets of interest. Creating stimuli-intrinsically interesting to Creating stimuli-intrinsically interesting to consumers consumers stimuli are simple and easy on consumersstimuli are simple and easy on consumers


Black box/CIP models

Consumer’sMind

Black box

Consumer”s Mind

CIP

inputs outputs

outputinputs

Externalworld

Externalworld

Externalworld

Externalworld


INTERNAL WORLDSINTERNAL WORLDSEXTERNALWORLD

SENSORYREGISTER

SHORT TERM MEMORY(STM) ORWORKING MEMOTY

LONG TERM

MEMORY (ltm)STIMULI

Short and long term memory


The 5 stage process

1:Problem recognition• The internal recognition by the consumer that their current needs are not being met• Discrepancy between actual & desired state• Leads to motivation• Could be real or imagined, physical or psychological• Implications? Construction of advertising; penetration pricing strategies for new products; importance of peers; social construction of desire.

2:Information SearchNext we ask ourselves the question of how do we solve our problem?•May already be familiar with options available•May consult people whose opinions we respect•May browse around the shops•May consult independent experts•Amount of information required dependent on risk attached•Implications? Role of marketing communications


The 5 stage process (continued)

3:Evaluation of alternatives•In deciding which product to buy we have to weigh up which

product best suits our needs•We construct criteria upon which to base our choice•We already may have a list of criteria or we may form one

during the information search•Compensatory vs. non compensatory evaluation

4: Product choice•Having weighed up the pros and cons between alternatives

eventually we have to make a choice•Could be as a result of the outcome of our evaluation process

against important criteria – best fit.•Choice could be affected by availability, payment options etc.•Implications? Make it easy!


The 5 stage process (continued)

5: Post purchase evaluationOnce we have made our purchase we decide whether its met our expectation

•If it does great positive brand associations and visa versa•Implications? After sales service, marketing communications


Value Creation


Reference Group Influences A reference group is the

group whose perspective an individual takes on in forming values, beliefs, attitudes, opinions, and overt behaviors. They set levels of

aspiration They help define the

actual items/services considered acceptable for displaying those aspirations.


Social Norms and Conformity

Social norm – any rule or behavior for meeting societal expectations normative system

Conformity pressures – actions taken to encourage or force members to act, think and/or express themselves in certain ways.

The more important a group is in our lives, the greater our desire to accept and conform to its norms


Homan’s Equation

The difference between the “price” we pay for conformity and the rewards obtained for doing so determines for each of us whether we wil l conform to group expectations and to what

extent. Price:•Loss of freedoms•Time commitment•Financial commitment•Etc.

Rewards:•Levels of acceptance•Advancement within the group•Prestige gained•Etc.


Reference Group Types

Primary reference group: one with which the individual has frequent face-to-face contact and in which members are close-knit. Examples: families, households, study groups, work teams,

roommates, etc. Secondary reference group: one in which interaction with

other members is less frequent Formal group: one in which there is some sort of structure

and/or for which there are specific membership requirements.

Informal group: one that has no special membership or attendance requirements, other than common interests.


Reference Group Types (continued)

Membership group: one to which a person currently belongs.

Aspirational group: a group that a person would like to be part of, but to which he or she does not currently/ may never belong

Dissociative group: a group that an individual avoids or denies connection with.


Reference Group Influences

Reference groups as part of the socialization process setters of roles information sources normative influences an expression of self-value


Conformity Pressure and Marketplace behavior

The influence of reference groups varies Groups tend to be more influential on product

decisions than they are on either brand or outlet choices Conspicuousness “based on exclusivity” -- product

decisions (bikers and black leather jackets) Conspicuousness “associated with the individual” --

brand decisions possible within product class, “allowed personal expression”


Social Power

Power of reward – praise, approval, acceptance, status, recognition, etc.

Coercive power – unacceptable behavior strongly discouraged

Expert power – informational attraction Referent power – closer the match between

person and group, more willingness to conform


Defining Customer Value

-

=

Total CustomerValue

Total CustomerCost

(Product, Service,Personnel, &

Image Values)

(Monetary, Time,Energy, &

Psychic Costs)

CustomerDelivered Value

(Profit to theConsumer)


Customer Satisfaction

Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations.

Buyer’s Expectations Are Based On:

Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises

Pro

du

ct’s

Act

ua

l Per

form

anc

e Performance Exceeds Expectations- Customer is Delighted

Performance Below Expectations - Customer is Dissatisfied


Total Customer Satisfaction

Highly satisfied (delighted) customers produce benefits:Highly satisfied (delighted) customers produce benefits: They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others.

Delighted customers have emotional and rational preferences for Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty. products, and this creates high customer loyalty.

Therefore, the purpose of Marketing is to generate customer value Therefore, the purpose of Marketing is to generate customer value profitably.profitably.


The Need for Customer Retention

NewCustomer

Costs

LostCustomer

Costs

CustomerLifetime

Value

The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider:


Building Customer Satisfaction and Loyalty by Relationship Marketing

StructuralTies

StructuralTies

SocialBenefits

SocialBenefits

Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with

Customers and Other Stakeholders.

Methods for Building Relationships Include Offering:

FinancialBenefits

FinancialBenefits


Value Chain Analysis

Business Policy and Strategy


Value Chain Analysis

The term value chain describes a way of looking at a business as a chain of activities that transform inputs into outputs that customers value.

Customer value derives from three basic sources:activities that differentiate the product

activities that lower its cost

activities that meet the customer’s need quickly.

Value chain analysis views the organization as a sequential process of value-creating activities, and attempts to understand how a business creates customer value by examining the contributions of different activities within the business to that value.


The Value Chain

Primary Activities

Sec

on

dar

y A

ctiv

itie

s

General administration

Human resource management

Research, technology, and systems development

Procurement

Inboundlogistics

Operations Outboundlogistics

Marketingandsales

Service

Mar

gin

Margin


Conducting a Value Chain Analysis

Step 1. Divide the firm’s operations into specific activities or business processes, usually grouping them according to primary and support activities. Within each category, a firm typically performs a number of discrete activities that may represent key strengths or weaknesses.

Step 2. Next, attach costs to each discrete activity. Step 3. Recognize the difficulty in activity-based accounting. Step 4. Identify the activities that differentiate the firm from

their competitors.


Conducting a Value Chain Analysis

Step 5. After documenting the value chain, managers need to identify the activities that are critical to buyer satisfaction and market success. These are the activities that deserve major scrutiny in an internal analysis. The mission should influence managers’ choice of the activities they

examine in detail. The nature of value chains and the relative importance of the activities

within them vary by industry. The relative importance of value activities can vary by a company’s

position in a broader value system that includes the value chains of its upstream suppliers and downstream customers or partners involved in providing products or services.

Step 6. Compare to competitors.

Marketing in action

Marketing

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