Revised What is Marketing Alexandria EMBA

8/9/2019 Revised What is Marketing Alexandria EMBA

1/33

James S. Boles

Robinson College of Business

Georgia State University


2/33

What is Marketing?

@James S. Boles 2010


3/33

Definitions of Marketingy The process of planning and executing the conception,

pricing, promotion, and distribution of ideas, goods andservices to create exchanges that satisfy individual andorganizational goalsThe American Marketing Association

y The art of selling productsKotler



4/33


Selling is onl The tip of the iceberg

There will always be a need for

some selling. But the aim of marketing

is to make selling superfluous. The aimof marketing is to know and understand

the customer so well that the product or

service fits him and sells itself. Ideally,

marketing should result in a customer

who is ready to buy. All that should beneeded is to make the product or

service available.

Peter Drucker


5/33

1-5

What is Marketing Management?

Marketing management is theartand i nce

of choosing target marketsandgetting, keeping, andgrowing

customers through

creating,delivering, and communicatingsuperior customervalue.


6/33

Marketingy Consumer Demand.

y Demand Analysis Decisions regarding..

yProduct Development Test Product

y Production/Manufacturing Distribution

y Promotion Feedback from buyers...



7/33

Scope of Marketingy Goodsy Servicesy Experiencesy Eventsy Personsy Placesy Propertiesy

Organizationsy Informationy Ideas



8/33

Marketing Conceptsy Definition of Marketingy Scope of Marketingy Marketing Strategyy Marketing Mixy MarketingProgram/Marketing Plan

y Segmentationy Target Marketsy Needsy Wants

y Valuey Satisfactiony Customer Retentiony Relationship Marketingy Customer Profitabilityy Customer Lifetime Valuey Demandy

MarketingP

lany Marketing Program



9/33

Core Marketing Conceptsy Segmentation

y Target Markets

y

NeedsyWants

y Demands

y Marketing Plan

y Marketing Program



10/33

Definitions of Key Termsy Value

y Ratio between what the consumer gets (both functional andemotional benefits) and what the consumer gives (monetary costs,

time costs, energy costs, and psychic costs)y Customer Perceived Value

y The difference between the prospective customers evaluation of allof the costs and of all of the benefits of an offering compared tothose of perceived alternatives

y

Satisfactiony The feeling of pleasure or disappointment resulting from

comparing a products performance with that individualsexpectations



11/33

Customer Retentiony Four steps to increase customer retention

y Define and measure its retention ratey Distinguish the causes of customer attrition & identify those that can be managed bettery Estimate the profit lost when it loses a customer-Customer Lifetime Value-the present

value of the profit stream that would have been realizedy Determinehow much it would cost to reduce the defection rate

y

High

ly satisfied customer:y stays loyal longer,y Provides positive word-of-mouth about the company and its products,y pays less attention to competitors offerings,y is less price sensitive,y offers product and service ideas,y costs less to serve than new customers

y Market-Driven Companiesy Requires a company-wide passion for and focus on customersy

Research

sh

ows th

at companies with

a customer focus were almost 7 percent moreproductive than their competitors



12/33

The marketplace isnt what it used to be

Information technology

Globalization

Deregulation

Privatization

Competition

Convergence

Consumer resistance

Retail transformation


13/33

Marketing Strategyy MarketingMix or

Four Ps (Six Ps?)

y Producty Packaging

y People

y Price

y

Placey Promotion

y FourCs (Six Cs?)

y Customer Solutiony Co-production

y Customer Cost

y Convenience

y Communicationy Customer relationships



14/33

1-14

Marketing Debate:

Take a Position!Does marketing shape consumer needs?

or

Does marketing merely reflect the needs and wants ofconsumers?


15/33

James S. Boles

Robinson College of Business

Georgia State University


16/33

Agenda: Marketing Mathy Types of Costs

y Variable Costsy Constanty Decreasing

y Fixed Costy Total Cost

y Margin Calculationsy Break Even Analysis

y Recovering Fixed Costsy Changes in Fixed Costsy Changes in Margin Per Unit

y Market Size and Sharey Impact ofPrice Decisions



17/33

Variable Cost Per Unity May depend on the total output produced

Total Cost Total Cost

VariableCost

VariableCost

FixedCost FixedCost

Total Volume Produced Total Volume Produced

$$

Figure 1a: Constant Variable

Cost Per Unit

Figure 1b: Decreasing Variable

Cost Per Unit



18/33

Types of Costsy Fixed Costs - Remain at the same level regardless

of the number of units produced

Ex. Regardless ofh

ow many golf clubs Callaway Golf sellsthe media outlet will get the same fee for anadvertisement

y VariableCosts - Change depending on theamount of product produced and sold

Ex. The more golf clubs Callaway Golf sells the greater areits packaging costs, shipping costs, raw material costs,etc.



19/33

Margin Calculationsy The difference between the per unit revenue and

the per unit variable cost is the unit margin (or the

margin or the unit contribution)

Ex. Selling price $65.35

Variable cost $36.31

Unit margin $29.04



20/33

Margin Calculationsy Sometimes it is useful to state the margin in percentage terms. To dothis, divide the unit margin in dollars by the revenue per unit in dollarsand then multiply that by 100:

Ex. Margin = $29.04 = .444 x 100 = 44.4%

Revenue $65.35

y To calculate a selling price given a cost and a % margin:

Selling Price = Cost1- [Percent Margin / 100]

= 100 = 2001- [50 / 100]



21/33

Price and Cost at Levels in the Channel of

Distribution

Manufacturer

Wholesaler

Retailer

Consumer

Variable cost per unit: $4.00Selling price to wholesaler: $7.50

Purchase price from manufacturer: $7.50Selling price to retailers: $8.70

Purchase price from wholesaler: $8.70Selling price to consumers: $10.00

Purchases from retailer at $10.00



22/33

Price and Cost at Levels in the Channel of

Distributiony Manufacturers Manufacturers Manufacturing

Margin selling price costto distributors

($3.50) = ($7.50) - ($4.00)

y Wholesalers W holesalers Price paid toMargin selling price manufacturer

to retailers($1.20) = ($8.70) - ($7.50)

y Retailers Retailers Price paid to

Margin selling price wh

olesalerto consumers($1.30) = ($10.00) - ($8.70)



23/33

Break Even Analysisy Recovering Fixed CostsWhat an organization makes in margins helps it to cover its

fixed costs andh

opefully produce a profit.Th

e number ofunits sold which just enables the company to cover its fixedcosts is its break even volume:

BEV= Fixed Costs in Dollars

DollarMargin per Unit



24/33

Break Even Analysisy The Beginning to Golf tape manufacturer had $700,000

in costs to produce the tape. These costs are fixed becausethey would not change with the number of tapes sold.Given the $3.50 margin per tape, to recover the $700,000investment, we would have to sell the break even volumeof:

BEV= $700,000 = 200,000 units$3.50 / unit



25/33

Break Even Analysis With

Changes in Fixed Costs

y We can also use this type of calculation to see what other

potential investments wouldh

ave to yield to beworthwhile:

Added Costs = $175,000 = 50,000 units

DollarM

argin per Unit $3.50 / unit



26/33

Break Even Analysis With

Changes in Margin Per Unit

y We can use this formula to examine changes in the unitmargin:

BEV= $700,000 = 280,000 units

$2.50 / unit



27/33

Market Size and Sharey We can convert the units number into a share of market

number. For example, suppose that market researchrevealed that a total of 5,000,000 golf instruction videos

were likely to be sold annually. With this information wecan calculate our break-even market share:

BreakEven Share of GolfVideo Market =

200,000 units = 4%5,000,000 units



28/33

Market Size and Sharey Suppose that our research revealed that of the 5,000,000

golf video tapes sold, only 1,000,000 were of the beginnervariety. It might be more appropriate to examine the share

we would need of th

is market instead:Break- Even Share ofBeginner GolfVideo Market =

200,000 units = 20%1,000,000 units

y We also need to select the time horizon which is the mostappropriate for us, since it will vary with each specificsituation. The two market share numbers we calculatedimplicitly assume that we were looking to recover our fixedcosts in one year.



29/33

Drivers of ProfitProfit

SalesRevenue

Sales

Volume

Costs

VariableCost

FixedCosts

Sales

Volume

VariableUnit Cost

Price



30/33

Effect of Price on Total Marginy A manufacturer sells a product for $100 per unit, achieving

sales of 1 million units per year. Variable costs per unit are$60, thus the unit margin is $40.

Sales Volume (millions)

PriceVariable Unit Cost $

10060

Variable Unit Cost Price

1

.5

1.5



31/33

Effect of Price on Total Marginy The manufacturer decides to lower the price of their product to $80 perunit. Variable costs per unit are still $60, thus the unit margin is now$20. The company must now sell 2 million products to get the same

profit.Sales Volume (millions)


60


1.0

.5

1.5

2.0

80

Necessary sales increaseto get the same profit



32/33

Effect of Price on Total Margin

y The manufacturer decides to increase the price of a product to $120 perunit. The variable costs per unit are still $60 so the unit marginincreases to $60. Thus, 666,666 units need to be sold to generate $40million total margin.

Sales Volume (millions)


60


1

.5

1.5

120

Acceptable sales reductionto get the same profit



33/33

Importance ofSales and Marketing:

Top Line Bottom Line

y If a firms top line (revenue line) = $0.00, what willthat firms bottom line look like?y

If you cannot develop products and service thatcustomers desire, you will fail!

y If you cannot place products/services where customerswant them, you will fail!

y

If you cannot market and sell effectively, you will fail!y If you price your product/service incorrectly, you will fail

-- to maximize revenue!


Revised What is Marketing Alexandria EMBA

Documents

Transcript of Revised What is Marketing Alexandria EMBA