Marketing Principles

Dr. Mary Wolfinbarger

Class Info

Syllabus: Find it at my websitewww.csulb.edu/~mwolfin

About Me

Education:Ph.D. 1990, Marketing, University of California, Irvine

M.B.P.A. 1985, Business and Public Administration, University of California, Irvine

B.S. 1983, English, Vanderbilt University

About Me Professional Experience Internal Marketing : Research for DuPont,

Polaroid, Taco Bell, PG&E, Intel, UCIMC Studying online consumer behavior (Center for

Research on Information Technology in Organizations)

Web strategy consulting: Primal Elements (www.primalelements.com)

Present research: Internal Marketing; Senior Internet Usage; email usage for HH decision making for separated spouses (Navy project); Simpsons’ fan sites and discussion groups

Lecture: Why Study Marketing?

How many of you bought something today? How many have seen or heard an ad today? How many of you consumed something today? How many of you engaged in word of mouth

about a product/service today?

Reason #1

Marketing is a fundamental human activity

it’s ubiquitous in daily life it happens around the world we can learn to make better

consumer decisions

Reason #2

Marketing impacts the economy Marketing (broadly conceptualized) is

about 50% of retail sales expenses Healthy marketing systems support economic

advance

Peter Drucker (writing about lesser developed countries)

“…in an economy that is striving to break the age-old bondage of man to misery, want and destitution, marketing is…the catalyst for transmutation of latent resources, of desires into accomplishments, and the development of responsible economic leaders and informed economic citizens.”

Reason #3

Marketing management is essential to organizational success

Build a better mousetrap?

…and the world will beat a path to your doorstep.

Or does it????

80-90% of new products fail Same rate for new businesses

Reason #4

Marketing can contribute to societal well-being

Reason #5

It’s about people (consumers) and it’s fun.

(Well, it’s more fun than accounting and calculus anyway…)

Student Criticisms of Marketing

Marketing communications are not always honest “They can sometimes play on people’s emotions and

fears and can cause them to buy things they really don’t need.”

It can “psychologically manipulate” consumers (they sell the “sizzle,” not the steak).

Youth may be targeted by companies selling adult products (e.g. alcohol)

Marketing sells products that can be harmful Some ads are crude

“[Sex] is not necessary to sell something, and if it is, the product is not worth much!”

Student Criticisms of Marketing

Telemarketers! Spam! Pop-up ads! Adware! “Sometimes I feel like I am being inundated with

information involving every medium of communication, particularly advertising.”

“Marketing is ubiquitous and unrelenting to the point where it is almost inescapable…it exploits and creates stupid holidays, making us feel guilty if we don’t buy presents for our family and friends.”

Sometimes minorities are stereotyped Advertising can be clichéd or corny

“99% of commercials are so boring.” Fashion advertising emphasizes an unattainable body

My criticism of marketing

Exalts the buying and consuming experience (of course)

Encourages us to find meaning in things Preaches that buying things makes you happy Implicitly demeans self-control, gratitude, and

transcendent (non-material) values (e.g. buy now, you deserve it….)

Transforms products into objects of affection and desire through promotions and branding

My criticism of marketing

Sometimes takes advantage of consumer lack of knowledge (let the buyer beware)

Especially true for goods and services with “credence” qualititesExamples: car repair, plumbing, medical

services, pharmaceuticals

One more criticism?:The “Paradox of Choice”

Sociologist Barry Schwartz shows that more choice can make us less happyChoice has increased over time“Maximizers” may get more than “satisficers”

but may be less happy• Choice increases the burdens of making “good

decisions” and regret over suboptimal decisions• Availability of choice raises expectations

What’s the solution?

What’s good about marketing?

Usually seeks to be successful by focusing on satisfying consumer desires (needs?)

Often delivers customers what they want, when they want it, at a price they are willing to pay

(More on customer focus later!) What’s the alternative?

Conceptualizing Marketing

What is marketing anyway?

Types of Marketing “Offerings”

Goods

are tangible

Types of Marketing “Offerings”

Services an experience provided by the application of

human or mechanical skill

Examples – haircut, dry cleaning, consulting, movies…

How services differ

Can’t inventory Intangible Quality control difficult Often a real time performance Consumer participation

A third marketing “offering”

Ideas -- the most intangible of all at worst, “spin” at best, worthy social causes are

promoted Is marketing persuasion? (MOTL)

Marketing as Selling Ideas

“Social marketing has been with us for a long time. The Greeks and Romans launched campaigns to free slaves. During the Industrial Revolution, campaigns were mounted to abolish debtor prisons and child labor and grant voting rights to women. In the past century social reform campaigns in

Selling ideas/Social Marketing

America have spoken for abolition, temperance and prohibition, and women’s suffrage movements.”

--James Mintz, Marketing News

Common Social Marketing Concerns

Health Environment Education Safety

The Marketing of Ideas/ Causes

“Charitable causes and social services campaigns for funds and donations are everywhere: on TV and radio, in newspapers and magazines, in point of purchase material, in public service announcements between the coming attractions and the main feature at the local movie theater…”

Cause-related marketing

Supporting causes as part of marketing program

Matching: e.g. Coors and clean water

Pro bono work

Advertising and media do free work Example: Partnership for a Drug-free

America

Goods, Services, Ideas and...

You can market yourself!

Marketing Yourself!

“Starting today you are a brand. You’re every bit as much a brand as Nike, Coke, Pepsi, or the Body Shop…start thinking like your favorite brand manager and ask yourself…What is it that my product or service does that makes it different?…Start by identifying the qualities or characteristics that make you distinctive from your competitors or your colleagues…What would your colleagues…say is your greatest and clearest strength? Your most noteworthy personal trait?” -- Tom Peters “The Brand Called You,’ In Fast Company, Sept. 1997

Profit vs. Not-for Profit

Have “customers” AND donors Customers may not want product Donors may want to be involved in

decisions No bottom line

Profit vs. Not-for Profit

Lack of marketing sophistication

Marketing as Exchange

The goal of marketing is to facilitate exchanges

Alternatives to Exchange

Origination Force Transfer

Requirements for exchange

Two or more parties Parties have unsatisfied wants/needs Parties have something of value to exchange Each party has something other party wants Means of Communication & delivery

(marketing!)

Requirements for Market Exchange

A “marketplace” A medium of exchange Specialization of labor Marketing management/coordination

Concepts of Marketing

The Marketing Concept

Achieve success by focussing on consumer needs

Adapt the business to deliver what consumers want

Be profitable

The most important principle of marketing? “I would say the most important principle of

marketing is to know your audience.” (audience=customer)

Keys to Implementing the Marketing Concept

Research

Departmental Integration

Commitment to “consumer sovereignty”

On Research

“More companies are increasing their research activities to pay closer attention to what consumers want. To them, the mission of marketing isn’t just persuasion, but learning how to satisfy consumer wants. Among other things, the customer demand for quality and reliability…has taught companies that it’s easier to sell products that meet the true need of consumers.” Wall Street Journal

The Marketing Mix

4 traditional P’s: Product Price Promotion Place (Distribution)

2 more: Preparedness Personnel

Definition of Marketing (until last year)

“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals.”

American Marketing Association Definition of Marketing, www.marketingpower.com

New AMA Definition (late 2004)

“Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”

Key new ideas: “value,” “customer relationships,” (the “new era orientation”), “stakeholders” (note: your text explains the “value chain”)

What’s gone? “Create exchanges,” the listing of the 4 P’s, “satisfying individual and organizational goals”

Creating value rather than satisfaction; benefiting stakeholders rather than indivs and organs.

The Marketing Concept?

“Selling is not marketing. Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product…[selling] does not, as marketing invariably does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse and satisfy customer needs.” – Theodore Levitt, “Marketing Myopia” 1960

Other Marketing Philosophies

Production Concept Product Concept Selling Concept Societal or Social Marketing Concept

Production Concept

Mass production Lower prices Example: Ford’s Model T

Production Concept

Assumption : consumers will buy it if it’s cheap Makes sense when little differentiation is

demanded Makes sense for price sensitive segments

The Production Concept

Why did Henry Ford’s production concept finally fail?

Product Concept

Customers want bells and whistles and will pay “The Engineering Fallacy” May result in unwanted products -- e.g. clear whiskey May make sense for some segments -- e.g. hobbyists Some segments and markets are novelty-driven

Product Concept

May overlook segments wanting simpler products

Selling Concept

Company relies on sales talent May result in high pressure sales tactics Makes more sense when new product’s

benefits are hard to understood

Selling Concept

Can be fall-back position of marketers without enough product development

More likely when salespeople feel they have one opportunity

Societal (Social) Marketing Concept

Deliver consumers desired satisfactions effectively and efficiently AND serve societal well-being

Societal (social) Marketing Concept

Four considerations consumer needs and wants consumer best interests profit society’s best interest

(Whew!)

Societal (social) Marketing Concept

Any problems with this? Consumers can want what isn’t good

for them Are businesses qualified to determine

what is good for society? Doing social good works can make it

more difficult to be profitable

Internal and External Environment

Internal Environment

Increasing emphasis on internal departmental integration AND teamwork

Marketing conflicts

Selected Conflicts

Selected Conflicts

R & D Basic Research Functional

Features

Marketing Applied Research Sales Features

Selected Conflicts

Engineering Few Models Long Lead Design

Time

Marketing Many Models Short Lead Time

Selected Conflicts

Finance Strict spending

rationales Strict budgets

Marketing Intuitive spending

rationales Flexible budgets

Selected Conflicts

Accounting Standard

Transactions

Marketing Special Terms &

Discounts

Selected Conflicts

Credit Low Credit Risks Tough Credit

Terms

Marketing Medium Risks Easy Terms

How to Resolve Conflicts

Market Orientation

What is Market Oriented?

Market information shared across the company

Interfunctional decisions Result: well-coordinated decisions executed

with commitment

What is Market Oriented?

“Serial communication, when one function passes an idea or request to another routinely without interaction -- like tossing a brick with a message tied to it over a wall -- can’t build the commitment needed in a customer-driven company…”

What is Market Oriented?

“…joint opportunity analysis, in which functional and divisional people share ideas and discuss alternative solutions and approaches, leverages the different strengths of each party.”

--Benson Shapiro, Harvard Business Review

What is Market-Oriented?

“Marketing…is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.”

--Peter Drucker

Empirical Study, Marketing Science Institute

Compared R&D, cost-cutting and market orientation ( “customer focus”)

Included new biz ventures in Japan and U. S. Market oriented co’s were more profitable R&D oriented co’s add features customers may not

want Cost-cutting strategy often easy to copy

External Environment

Channel: Set of firms that cooperate to make the product available

Markets consumer markets business markets government markets international markets secondary markets

The External Environment

Competitors Publics Financial Publics

Media Publics

Citizen Action Publics

The General Public

The External Environment

Citizen Action Publics

“Most boycott groups…don’t expect or even hope to gut a company’s sales with their protests. Nor do companies fear it. Still, even a small decline can have an effect…a boycott that affects sales by 5% is considered cause for concern by companies.

“Further, those likely to boycott are often the most valuable demographic group…two income families, holding college degrees and hailing from the big-spending thirty-something crowd.” Wall Street Journal

The External Environment

The Macro Environment Demographics Cultural Forces Economic Forces-disposable income, foreign economies Technological Forces The Regulatory/Legal Environment Government: Federal Trade Commission Non-Government: BBB, NARB, Business and Trade Associations

Trends in the Macroenvironment

Demographics

Info from www.census.gov

Trends in the Macroenvironment

Estimated U. S. Population: About 295,000,000

One birth every 8 seconds One death every 12 seconds

Demographics

Estimated World Population

Over 6 billion! (6.4 billion) 4.2 births/second 1.7 deaths/second

Changing face of U. S. (2000 Census)White 77.1%Black/African American 12.9American Indian or Alaska Native 1.5Asian 4.2Native Hawaiian/other Pacific Islander .3Some other race* 6.6*Adds to more than 100% because 2.4% of people reported 2 or more races

Hispanic (of any race**) 12.5%**(69% of Hispanics are classified as “white”)

Seniors

15% of population is currently 65+ Estimate for 2050: One in four!

Demographics

Median Income (2000)U. S. $42, 148California 46,802Maryland 51,695West Va 29,052Colorado 48,506Texas 39,842Alabama 33,105

Demographics

*75% of jobs in services

*Marrieds just over 50% of households

*Nearly 1/4 of households are of single people

Education (25+)

*H. S. degree or higher 80.4%

*B. S. or higher 24.4

*Grad school 15.5

Technology B2C Commerce: ~$125 billion (including travel) Current retail percentage: 3.5% -5% (and growing) Eventual consumer %? 10%? 15% 25%? About 2/3s of Americans have Internet connections at

home About 30% of Americans don’t use the Internet (yet) Broadband connections growing (50% of Internet HH)

Marketing Ethics

American Marketing Association Code of Ethics

AMA Code of Ethics

Page 67 It is signed by everyone who joins the

American Marketing Association

AMA Code of Ethics

Marketers’ professional conduct must be guided by The basic rule of professional ethics; not knowingly to do harm The adherence to all applicable laws and regulations The accurate representation of their education training and

experience; and The active support, practice and promotion of this Code of

Ethics.

AMA Code of EthicsHonesty and Fairness. Marketers shall uphold and

advance the integrity, honor, and dignity of the marketing profession by

Being honest in serving consumers, clients, employees, suppliers, distributors and the public

Not knowingly participating in conflict of interest without prior notice to all parties involved; and

Establishing equitable fee schedules...

AMA Code of Ethics

Rights and Duties of Parties. Participants in the marketing exchange process should be able to expect that:

Products and services offered are safe and fit for their intended uses;

Communications about offered products and services are not deceptive;

All parties intend to discharge their obligations, financial and otherwise in good faith…..

AMA Code of Ethics

In the area of product development management:

Disclosure of all substantial risks associated with product or service usage….

AMA Code of Ethics

In the area of promotions:

Avoidance of false and misleading advertising

Rejection of high pressure manipulations, or misleading sales tactics

Avoidance of sales promotions that use deception or manipulation

AMA Code of Ethics

In the area of distribution:

…Not using coercion in the marketing channel

Not using undue influence over the resellers’ choice to handle a product

AMA Code of Ethics

In the area of pricing:

Not engaging in price fixing

Not practicing predatory pricing

Disclosing the full price associated with any purchase

AMA Code of Ethics

In the area of marketing research:

Prohibiting selling or fund raising under the guise of doing marketing research

Maintaining research integrity by avoiding misrepresentation and omission of pertinent research data

Treating outside clients and suppliers fairly

AMA Code of EthicsOrganizational Relationships ….Apply confidentiality and anonymity in professional

relationships with regard to privileged information Meet obligations and responsibilities in contracts and

mutual agreements in a timely manner Avoid taking the work of others, in whole, or in part, and

represent this work as their own or directly benefit from it without compensation or consent of the originator or owner

AMA Code of Ethics

Organizational Relationships (continued) Avoid manipulation to take advantage of situations to

maximize personal welfare in a way that unfairly deprives or damages the organization or others

Any AMA members found to be in violation of this Code of Ethics may have his or her Association membership suspended or revoked.