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Understanding MarketingManagement

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Definition of Marketing

Marketing is the activity, set of institutions, andprocesses for creating, communicating, delivering,and exchanging offerings that have value for

customers, clients, partners, and society at large.(October 2007, AMA)

Marketing is meeting needs profitably.

Marketing management is the art and science ofchoosing target markets and getting, keeping, andgrowing customers through creating, delivering, andcommunicating superior customer value.

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Peter Druckers Perspective

on Marketing

There will always, one can assume, be needfor some selling. But the aim of marketing is

to make selling superfluous.T

he aim ofmarketing is to know and understand thecustomer so well that the product or servicesfits him and sells itself. Ideally, marketing

should result in a customer who is ready tobuy. All that should be needed then is tomake the product or service available.

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What is Marketed?

Goods

Services

Events & Experiences

Persons

Places & Properties

Organizations

Information

Ideas

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Case: (Miyazaki)

2007123

3654001822230165

Trendy2007

GQ2007

2008

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National Milk Processors

Education Program

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Core Marketing Concepts

Needs, wants and demands

Target markets, positioning, and

segmentation Offerings and brands

Value and satisfaction

Marketing channels: consist ofcommunication channels, distributionchannels, and service channels.

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Core Marketing Concepts

Supply chain: a longer channel stretchingfrom raw materials to components to final

products that are carried to final buyers. Competition

Marketing environment: consist of the taskenvironment and the broad environment

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Needs, Wants and Demands

Needs (): the basic human requirements.

Physical: food, clothing, shelter, safety

Social: belonging, affection Individual: learning, knowledge, self-expression

Wants (): when needs are directed tospecific objects that might satisfy the need.

Demands (): wants for specific productsbacked by an ability to pay.

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Does Marketing Create or SatisfyDoes Marketing Create or Satisfy

Needs?Needs?

Take a position: Marketing shapesTake a position: Marketing shapes

consumer needs and wants versusconsumer needs and wants versus

Marketing merely reflectsMarketing merely reflectsthe needs and wants ofthe needs and wants of

consumers.consumers.

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Responsive, Anticipative, and

Creative Marketing

A responsive marketer finds a stated need and fillsit.

An anticipative marketer looks ahead into what

needs customers may have in the near future. A creative marketer discovers and produces

solutions customers did not ask for but to which theyenthusiastically respond. Akio Morita () once proclaimed that Sony doesnt

serve markets; Sony creates markets. The Walkman is aclassic example.

3M: Our goal is to lead customers where they want to gobefore they know where want to go.

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Demand States and Marketing

Tasks

Marketing managers are responsible fordemand management. Negative demand counter marketing, e.g.

insurance. Non-existent demand stimulus, e.g.

encyclopedias.

Latent demand developing, e.g. solar energy,

Kindle. Declining demand remarketing, e.g.Arm &

Hammerand Listerine ().

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Can you name a category of productsCan you name a category of products

for which your negative feelings havefor which your negative feelings havesoftened?softened?

What precipitated this change?What precipitated this change?

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Company Orientations Toward

the Marketplace

The production concept

The productconcept

The sellingconcept The marketingconcept

The holisticmarketingconcept

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The Production Concept

The idea that consumers will prefer products that arewidely available and inexpensive.

Focus: high production efficiency, low costs, and

mass distribution mass marketing.

It is useful when (1) the demand for a productexceeds the supply (e.g., developing countries suchas China); (2) the products cost is too high.

Examples: Fords Model-T, Coca-Cola, standard rawmaterials and components.

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The Product Concept

The idea that consumers will prefer productsthat offer the most quality, performance, or

innovative features. Focus: making superior products and

improving them over time.

Examples: digital camera, CPU.

Better mousetrap fallacy

Marketing myopia (Theodoes Levitt, 1960)

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The Selling Concept

The idea that consumers will not buy enoughof the firms products unless it undertakes a

large-scale selling and promotion effort. The selling concept assumes that customers

who are coaxed into buying the product willlike it. Or, if they dont like it, they will

possibly forget their disappointment and buyit again later.

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The Selling Concept

Sergio Zyman (Coca-Colas former vicepresident of marketing): the purpose ofmarketing is to sell more stuff to more people

more often for more money to make moreprofit.

Focus: undertake an aggressive selling andpromotion effort.

Practiced most aggressively with unsoughtgoods (e.g., insurance, encyclopedias, andfuneral plots).

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The Marketing Concept

The idea that the key to achieving organizationalgoals consists of the company being more effectivethan competitors in creating, delivering, and

communicating superior customer value to itschosen target markets.

The marketing concept emerged in the mid-1950s.

Slogans: Find wants and fill them, Love thecustomer, not the product, and We do it all for you(Toyota).

Three hurdles: organized resistance, slow learning,and fast forgetting.

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Selling Concept vs. Marketing

Concept

Selling concept Marketing concept

Focus on the needs of the

seller(Theodore Levitt,1960)

Focus on the needs of the

buyer(Theodore Levitt,1960)

The manufacturer: This is

what I make, wont youplease buy it

The consumer: This is

what I want, wont youplease make it

Inside-outperspective Outside-in perspective

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Contrast between the Selling Concept

and the Marketing Concept

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The Marketing Concept

Segment marketing

/

46/54 39

80%

82.9%

5

70.9%

48/52 39

80%

80.8%

5

61.8%

71/29 30

91.4%

63.1%

5

62.1%

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An Example of Segment

Marketing

(October 2008)

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An Example of Segment

Marketing

(October 2008)

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An Example of Segment

Marketing

(October 2008)

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An Example of Segment

Marketing

(October 2008)

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The Extreme of the Marketing

Concept The CustomerConcept

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Is mass marketing dead?Is mass marketing dead?

Take a position: Mass marketing isTake a position: Mass marketing isdead versus Mass marketing is still adead versus Mass marketing is still a

viable way to build a profitable brand.viable way to build a profitable brand.

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Joint Strike Fighter (JSF)

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The Holistic Marketing

Concept

Based on the development, design, andimplementation of marketing programs,processes, and activities that recognize theirbreadth and interdependencies.

An approach to marketing that attempts torecognize and reconcile the scope and

complexities of marketing activities.

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Holistic Marketing Dimensions

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Integrated Marketing

The marketers task is to devise marketingactivities and assemble fully integratedmarketing programs to create, communicate,and deliver value for consumers.

McCarthys four Ps (the sellers point of view)

Product

Price Place

Promotion

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Integrated Marketing

From a buyers point of view, each marketingtool is designed to deliver a customer benefit.

Solution: How can I solve my problem?

Information: Where can I learn more about it?

Value: What is my total sacrifice to get thissolution?

Access: Where can I find it?

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The FourPComponents of the

Marketing Mix

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Marketing-Mix Strategy

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Internal Marketing

The task of hiring, training, and motivatingable employees who want to serve customerswell.

Marketing must be embraced by the otherdepartments (e.g. production, finance, andhuman resource); they must also think

customer.

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40

Question: What would you do if you were the VP of

marketing in this airline? How would internal marketing

be ofhelp? Show specific examples

An Example of a Coordination Problem that

Requires Effective Internal Marketing

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Socially Responsible Marketing

The Societal Marketing Concept

The idea that holds that a company shouldmake good marketing decisions byconsidering consumers wants, thecompanys requirements, consumers long-run interests, and societys long-run interests.

Examples: Body Shop, HSBC, Dell Asia in

Malaysia, Bata Indonesia. Johnson & Johnsons Tylenol ($240 million), (NT 120 million), .

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An Example of the Social

Marketing Concept Earth Tree

FairTrade

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CustomerRelationship

Management (CRM)

The overall process of building and maintainingprofitable customer relationships by deliveringsuperiorcustomer value andsatisfaction.

The ultimate outcome of relationship marketing is aunique company asset called a marketing network.

A marketing network consists of the company andits supporting stakeholders customers, employees,

suppliers, distributors, retailers, ad agencies,university scientists, and others with whom it hasbuilt mutually profitable business relationships.

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Customer Lifetime Value and

Equity

Customer lifetime value: the value of theentire stream of purchases that the customerwould make over a lifetime of patronage.

Lexus: $600,000; Taco Bell: $12,000;Supermarket: $50,000.

Customer equity: the total combined

customer lifetime values of all of thecompanys customers.

Cadillac vs. BMW

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An Example of Selective

Relationship Management

(Southwest Airlines)

Herb Kelleher

Kelleher

(p. 42, December 2007)

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CustomerRelationship Groups

Projected loyalty

High

Low

Long-termcustomers

Short-termcustomers

Good fit betweencompanys offerings andcustomers needs; high

profit potential

Limited fit betweencompanys offerings and

customers needs; lowprofit potential

Little fit between companysofferings and customers

needs; lowest profitpotential

Good fit betweencompanys offerings and

customers needs; highest

profit potential

Strangers

Butterflies True Friends

BarnaclesProfitability

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Share ofCustomer

The portion of the customers purchasing inits product categories that a company gets.

Methods to increase share of customer Offer greater variety to current consumers

Train employees to cross-sell and up-sell in orderto market more products and services to existingcustomers.

Amazon: books, music, videos, gifts, toys,consumer electronics, office products, and soon.

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Customer Satisfaction

The extent to which a products perceivedperformance matches a buyers expectation.

Smart companies aim to delight customers bypromising only what they can deliver, thendelivering more than they promise.

Examples: Lexus; Southwest Airlines;

Seasons Hotels; Nordstrom department store.

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Satisfying CustomerComplaints

Rate of dissatisfaction: 25%; rate ofcomplaint in dissatisfaction: 5%.

50% of complaints report a satisfactoryproblem resolution.

Examples: Williams-Sonoma; EnterpriseRent-A-Car.

On average, satisfied 3 people, anddissatisfied 11 people.

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customer lifetime value

(p. 44, December 2007)

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Satisfying CustomerComplaints

Rate of complainant repurchase

Resolved Resolvedquickly

Majorcomplaints

34% 52%

Minorcomplaints

52% 95%

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What is your strategy to deal with anWhat is your strategy to deal with an

unsatisfied customer?unsatisfied customer?

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CustomerRelationship Levels

and Tools

Level of relationship: basic reactive (e.g.P&G)accountableproactivepartnership(e.g. Boeing).

Tools:

Add financial benefits, e.g. frequent-flier program.

Add social benefits, e.g. club marketing program.

Add structural ties, e.g. McKesson; FedEx.

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Levels ofRelationship

Marketing

High margin Mediummargin

Low Margin

Many customers/distributors

Accountable Reactive Basic or reactive

Medium number ofcustomers/

distributors

Proactive Accountable Reactive

Few customers/distributors

Partnership Proactive Accountable

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Case: Harley-Davidson

Harley Owners Group (H.O.G.)

H.O.G. benefits include Hog Tales, a touringhandbook, emergency road service, a

specially designed insurance program, theftreward service, discount hotel rates, and aFly & Ride program.

The company also maintains an extensiveWeb site devoted to H.O.G., which includesinformation on club chapters, events, and aspecial members-only section.

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In 1981, American Airlines first

introduced the AADVANTAGEfrequent-flier program.When other

airlines copy this strategy, do they

engage in the prisoners

dilemma?

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Prisoners Dilemma

layer 1 Player 2Cooperate Fink

Cooperate 2, 2 -3, 3

Fink 3, -3 -2, -2

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