MGT 6450 Marketing

• Web Main Menu

• Syllabus

• Schedule & Outline

• Class e-mail

• News

• Overview of marketing

• Small group formation & discussion of products/services via product life cycle

• Next week: market segmentation

Marketing News

• Generational Marketing• Social Marketing News• Advertising Age• AMA Marketing News•Direct Marketing News•Marketing Today

“The societal marketing concept holds that the organization's task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors, in a way that preserves or enhances the consumer's and the society's well-being. “

"Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create and maintain relationships that will satisfy individual and organizational objectives."

How is marketing done in your organization?

• How is marketing currently conducted in your organization? What role does a marketing department have in helping form organizational strategy; how well connected are they with other departments and functions in the organization; how is market information gathered, analyzed and used?

• What are the “change drivers” that have propelled marketing to this position in organizations? Why is strategic marketing so crucial in today's marketplace?

• In your organization, where does marketing fit with strategic planning?

• How aware are employees of the marketing concept and efforts of the marketing department (or whomever does it)?

• Examine your organization's mission statement and define it from product/service perspective as well as marketing perspective (who are the customers & what needs are you committed to satisfying?)

• Using the Product Life Cycle, place your product/service line along the continuum (Portfolio methods)

Discussion Questions

Less expensive, more widely available communications, transactions, information, and production technologies such as:• Internet based communication and

commerce• Data mining• Pattern recognition algorithms (neural

networks)• Computer integrated design• Rapid prototyping • Simulation testing of designs and

prototypes• Real time data tracking• Nanotechnology• Flexible manufacturing technology• Enterprise wide software

Culturally, ethnically diverse workforce that is more mobile:• Political and economic conditions creating

more opportunities for markets and supplies worldwide

• Aging workforce worldwide• Language and culture differences

Competitive environment:• More informed customers• More evenly distributed technological capabilities

among competitors• More closely linked suppliers• Easier entry for new competitors• World wide market for supplies and workers

Business processes:• More knowledge about customer buying patterns• Improved forecasting ability• Improved production scheduling and tracking• More rapid production process design

Integration:• Coordination of geographically dispersed operations• Coordination of culturally diverse workforce• Coordination of logistics and information with

dispersed networks of customer and suppliers

Workforce:• More use of temporary workers• Competition for skilled and knowledge workers• Management across international cultures• Difficulty in molding organizational cultures

Change Drivers Effects of Change Drivers

• 75% of executive teams do not have a clear customer propositions (idea of the mix that appeals to the target market)

• 85% of management teams spend less than one hour per month discussing strategy

• 60% of organizations don't link strategy and budgeting

• 92% of organizations don't report on strategic lead indicators

• Less than 5% of an organization's workforce understands its strategy

• Only 51% of senior managers, 21% of middle managers, and 7% of line employees have personal goals linked with strategy

• Organizations find that up to 25% of strategy measures change each year

• Tangible book value represented only 62% of industrial organization's market value in 1982; in 1992 it was 38%, and 10-15% in 2000

• The failure rate of strategies is between 70-90%, mainly due to poor implementation

What’s gone wrong with strategy?

Information from Market Research

SWOT or TOWS Analysis for Strategy

Eras of Marketing

Production Era (1900-1925): “a good product sells itself”; offer more products! Build it and they will come! [problem: unsold inventory]. First courses with “marketing” title. Focus on distribution.

Sales Era (1925-1950s): Marketing principles. Good advertising and sales will overcome consumer resistance” (Brand image differentiation); Marketing associations & journals [problem: broad advertising not cost-effective]

Marketing Era (1950s-1980s): Mass market boom! Use of behavioral and quantitative sciences. Customer is King! Find (create) a need and fill it; (market segmentation & targeting) satisfy needs! [problem: too short term & costly]

Relationship/Partnering Era (1990-): Short term financial focus, downsizing, globalization, reengineering trends. Publish or perish pressure on research. Concern, trust, and investment in collaborative relationships with long term customers and competitors (e.g., Saturn owner parties, Sam’s Club memberships, etc.). Specialized interest areas; sophisticated multivariate segmentation; wide application [Problem: still short term, fragmented research, customer manipulation]

Next ?

Pre-Marketing Era (1750-1900): “I got it, you want it?”

Pre-Marketing Era (1750-1900)

• “I got it, you want it?”•Cottage industries making narrow

specialties with little variation•Often family businesses•Generally for local trade•Word of mouth promotion• Example: China 1986 basket and wood

shipping containers

Production Era (1900-1925): [problem: unsold inventory]...

• “A good product sells itself” (unsold inventory)

• offer more products!• Focus on distribution• First courses with “marketing”

title

Sales Era (1925-1950s)

• Marketing principles

• Good advertising and sales will overcome consumer resistance”

• Brand image differentiation

• Marketing associations & journals

• problem: broad advertising not cost-effective

Marketing Era (1950s-1980s)

• Mass market boom!

• Use of behavioral and quantitative sciences

• Customer is King!

• Find (create) a need and fill it

• problem: too short term & costly

• market segmentation & targeting, satisfy needs! (high sales, low prices)

Relationship/Partnering Era (1990-)

• Short term financial focus, downsizing, globalization, reengineering trends.

• Concern, trust, and investment in collaborative relationships with long term customers and competitors (e.g., Saturn owner parties, Sam’s Club memberships, etc.).

• Publish or perish pressure on research.

• Specialized interest areas; sophisticated multivariate segmentation; wide application

• Problem: still short term, fragmented research, customer manipulation

Hummer Party

Sam’s Club

Social Media Marketing (2005-)

• Widespread availability of technology enables lower cost channels

• Online interactivity provides for promotion and information gathering

• Growth of social networking makes for ubiquitous advertising opportunities

• Search specification allows for targeted advertising

• Viral marketing spread through the web via web, e-mail, blogs, video, and other mobile media

Innovation & Product Development:

death of an idea

• 10% of ideas reach the test market stage• 50% of new products fail in test marketing• 50% of those fail on national launch• only 2.5% ever enter the marketplace• 1 entrant for every 64 ideas• the average new product that fails costs about $50 million• some product failures have losses of over $100 million for some

companies

64 ideas

1 ideaTesting time

Idea

s

Marketing decreases costs, improves the quality of ideas, and ensures better fit with the marketplace

Product• Product variety• Quality• Design• Features• Accessories • Brand name• Packaging• Sizes• Services•Warranties• Returns, repairs & support

Place• Distribution channels• Coverage• Assortments• Locations• Inventory management•Warehousing availability• Order processing• Transportation costs

Price• List price•Wholesale pricing• Seasonal pricing• Discounts• Price flexibility• Allowances• Payment period• Payment methods• Credit terms• Product bundling

Promotion• Sales promotion• Personal selling• Advertising• Sales force• Public relations• Direct marketing

Target Market

The Four Ps

$

Vishay Semiconductor Company

Example: Products positioned along the product lifecycle

Fairchild Semiconductor Product Lifecycle

But sometimes it crashes…

Effects & responses

Introduction Growth Maturity Decline

Competition None of importance Some emulators Many rivals competing Few with rapid shakeout

Overall strategy Market establishment; persuade early adopters to try product

Market penetration; persuade mass market to prefer the brand

Defense of brand position; check competitor inroads

Prepare removal; drain brand of all benefits

Profits Negligible due to high production & marketing costs

Reach peak levels due to high prices & growing demand

Increased competition cuts into profit margins & total profits

Declining volume pushes costs to levels that eliminate profits

Retail prices High to recover excessive launch costs

High to take advantage of growing demand

What traffic will bear; avoid price wars

Low enough to permit liquidation of inventory

Distribution Selective as distribution is built up

Intensive; use small trade discounts since dealers eager to store

Intensive; heavy trade allowances to retain shelf space

Selective; unprofitable outlets slowly phased out

Advertising strategy

Aim at needs of early adopters

Make mass market aware of brand benefits

Advertise to differen-tiate similar brands

Emphasize low price to reduce stock

Advertising emphasis

High to generate awareness & interest in early adopters & dealers to stock the brand

Moderate to let sales rise on momentum of word-of-mouth

Moderate since most buyers are aware of brand characteristics

Minimum expenditures to phase out product

Consumer roles & promotion expenditures

Heavy to entice target groups with samples, coupons, etc. to try brand

Moderate to create brand preference (advertising for this)

Heavy to encourage brand switching to convert buyers into loyal users

Minimal to let the brand coast by itself

What’s your product lifecycle mix?

Team activity: Construct a product life cycle diagram for one of the companies in your team

High growth business strong in competitive market; high point share & ideal business; promote question marks & support R&D

Low growth business with low point share; were stars but have lost their attractiveness; finance question marks and stars

Low point share but may have high growth rate and therefore potential, but require high effort to grow; risky new ventures may become stars or dogs

Low relative share and low expected growth rate; may generate enough points to sustain but not competing; possible niche market; consider divestment

Enterprise Resource Planning System (ERP): BCG Matrix of products

The GE/McKinsey Matrix

Business Strengths

Indu

stry

Att

racti

vene

ss

High Medium Low

High

Med

ium

Low Invest in,

growth strategy

Monitor performance, selective strategy

No growth or investment, consider divestment or liquidation

• Market size & growth• Industry profit margins• Competitive intensity• Seasonality• Cyclicity• Economies of scale• Technology• Social, environmental, legal,

& human impacts

• Relative market share• Profit margins• Ability to compete on price & quality• Knowledge of customer & market• Competitive strengths & weaknesses• Technological capability• Caliber of management

Ansoff’s Product/Market Matrix

Existing products New Products

ExistingMarkets

NewMarkets

Market Penetration:• Increase product purchase in existing

markets (withdrawal, do nothing, consolidate, retrenchment)

• Revitalize brand image• Coordinate advertising and sales training• Adapt to market change• Increase market share• Increase consumer usage (frequency,

quantity, new application)

Product Development:• Introduce new products into existing

markets; can be risky & expensive• Product launch• Add product features & refinements• Develop new products for same

market

Market Development:• Explore new markets for existing

products; when distinctive competencies rest with product not market

• Expanding geographic distribution• Targeting new customer segments

Diversification: • introduce new products into new

markets; horizontal, vertical, conglomerate

• Acquisition/merger• New business venture

Conclusions about marketing matrix models--

• There is a risk of using matrix models is misclassifying businesses

• Use multiple models to ensure better coverage • Know the strengths and limits of each model; when to use and

avoid them • Integrate the information from matrices with other sources of

information and comparison • Don't let the matrix make decisions-- people make decisions!

Next Week: Market S-e-g-m-e-n-t-a-t-i-o-n

• Be able to describe yourself using segmentation concepts

• Be able to discuss how your company uses (or can use) segmentation

• Explore a market segment for your company and how that might add value to your business