Basics of Marketing Management - Блаце · International Business & Marketing at Provadis...

Prof. Dr. Michael Nagel 2 Basics of Marketing Management

Basics of Marketing Management Personal introduction

Prof. Dr. Michael Nagel

Current positions v  Head of Department of International Business & Professor of International Business at DHBW Stuttgart v  Senior Advisor at BearingPoint (formerly: KPMG Consulting)

Focus areas of expertise v  International Management, Strategic Management, Marketing, Business Consulting

Project and consulting experience v  Various national and international projects in the automotive, machinery, service, chemical, pharmaceutical

and oil and gas industry v  International working experience e.g. in the following countries: China, Russia, Singapore, South Africa, UK, USA

Professional background v  Dean of the Faculty of Business Administration, Head of Bachelor Betriebswirtschaftslehre, and Professor of

International Business & Marketing at Provadis School of International Management & Technology (Frankfurt/Main) v  Senior Manager at BearingPoint and Director for Growth Management and Global Market Expansion v  Project Manager in a consultancy and in an international MBA-program focusing on emerging markets (BRIC) v  Lecturer and Postdoctoral Research Fellow at the Universities in Tübingen, Ludwigsburg, Potsdam and Berlin


n  Positive attitude

n  Active participation

-  Lots of questions

-  Attention to detail

-  Effort to the end

-  Examples from your own areas

n  Time management

-  Start time

-  Breaks

n  Mobile phones off

n  Laptops open only when needed

n  …

Basics of Marketing Management Code of conduct


n 

n 

n 

n 

n 

Basics of Marketing Management Expectations …?


Basics of Marketing Management Objectives

n  Introduction to the marketing management process

n  Introduction to all aspects of marketing

-  Strategic marketing planning

-  Product planning and development

-  Pricing

-  Promotion planning

-  Distribution

n  Fun

1. Setting the scene for marketing


Marketing management process

Basics (I)

Theoretical perspective

Internal perspective (III)

External perspective (II)

Strategic marketing

Operational marketing

Market research

Knowledge of basic concepts, ideas and terms

Knowledge of influencing factors of buying beaviour

Marketing-controlling

Marketing- organisation

Setting the scene for marketing Marketing management process


Setting the scene for marketing What is a market?

The following stakeholders have an important influence on market activities:

n  Buyers

n  Companies

n  Sales partners

n  Public institutions

n  Lobbyists

We define a market as any place where supply meets demand, thus leading to the formation of prices. Supply and demand can meet at a physical location (e.g. in a store or at a trade fair) or at a virtual location

(e.g. on the internet or by telephone).


A B

C D

Market potential

Market volume

Sales volume

Setting the scene for marketing Markt potential, market volume, sales volume


ca. 1900-1920

Sales

ca.1920-1950 ca. 1950-1980 ca. 1990-today ca. 1980-1990

Sales

Advertising

Marketing Implementation

Market/Customer Oriented

Management

Sales decisions

Communication decisions

Pricing decisions

Product decisions

Marketing Mix

Sales decisions

Communication decisions

Pricing decisions

Product decisions

Marketing Mix

Vertriebspolitik

Kommunikations- politik

Preispolitik

Produktpolitik

Marketing Mix

Marketing Implementation

From sales orientation to market and customer oriented management

Setting the scene for marketing Development of the marketing concept

2. Key aspects of marketing strategy



Basics (I)




Strategic marketing


Market research





Key aspects of marketing strategy Marketing management process


Key aspects of marketing strategy Strategy – on which organisational level?

Corporate Level

Business Level

Corporate Level

Business Unit Level

Functional Level

What & Where ?

How ?

What is our (set of) business and where do we want to be (to invest) in?

How do we want to position ourselves in the market and against our competitors?

How should we compete in the chosen businesses?

How can each function contribute to our competitive advantages of each

business?

Pur

chas

ing

Logi

stic

s

Pro

duct

ion

Sal

es

etc


Key aspects of marketing strategy Levels of strategy

CORPORATE STRATEGY

BUSINESS STRATEGY

FUNCTIONALSTRATEGY

Corporate Head Office

Division A Division B

R&D

HR

Finance

Production

Marketing/ Sales

R&D

HR

Finance

Production

Marketing/ Sales

Example: Daimler Chrysler

Example: Mercedes

Benz


Key aspects of marketing strategy How clear is the strategy of your company?


Key aspects of marketing strategy We tend to get a little confused with the following terms/definitions

Vision Mission

(Mission Statement)

Strategy


Key aspects of marketing strategy What is a vision?

n  A vision is an almost impossible dream (Philip Kotler)

n  The vision is …

-  The vision is the general statement of the long term business perception of the company

-  A concrete picture of the future, near enough, that we can still see the realization of it, but far enough, that we can motivate the staff for a new reality

-  Defines a future state about 10 years in the future

-  Something that might change over time

n  The vision ain’t …

-  no Utopia

-  no extrapolation from the past

-  no definition of precise objectives


Key aspects of marketing strategy What is a mission?

n  I am on a mission! (Are you too?)

n  The mission is …

-  Mission is the purpose or

-  The main job of an organization (think of Star Trek)

-  It’s usually only one single sentence or phrase

n  The mission ain’t …

-  not always positive

-  something graved in stone that does not change


Key aspects of marketing strategy What is a strategy?

n  The strategy is …

-  a coordinated set of activities

-  which shall determine the positioning towards defined stakeholders

-  It refers to the external relation of an organizational (business) unit

n  The strategy ain’t …

-  nothing fancy

-  no rocket science

-  nothing that requires a Harvard degree


Key aspects of marketing strategy Strategy development process

External Analysis

Aggregation (e.g. SWOT)

Internal Analysis

Strategy Implementation

Vision, Mission

Corporate Strategy

Business Unit Strategy

Functional Area Strategy


Key aspects of marketing strategy External analysis: PEST

Environmental influences

Political n  Political stability n  Operational restrictions n  Discriminatory restrictions n  Laws and regulations

Economic n  Growth/inflation rates n  Currency movements n  GDP per capita n  Unemployment rate

Socio-Cultural n  Language, religion n  Values and attributes n  Tastes and preferences n  Material culture

Technological n  Communication patterns n  ISDN n  Internet n  Infrastructure

PEST Framework


Key aspects of marketing strategy External analysis: Porter’s Five Forces

SUPPLIERS

POTENTIAL ENTRANTS SUBSTITUTES

Customers

INDUSTRY COMPETITORS

Rivalry among existing firms

Bargaining power of suppliers

Bargaining power of customers

Threat of

new entrants

Threat of

substitutes

Polit

ical

Ec

onom

ical

Social

Technological


Key aspects of marketing strategy External analysis: Competitors

Performance Level

Performance level

Pric

e le

vel

Price level Today

Future (target)

Price level 1 = cheapest competitor in the market Price level 5 = most expensive competitor in the market

Benchmark of the competitor in all other criteria of the buying decision (quality, service, availability, …) Performance level 1 = worst competitor in the market Performance level 5 = best competitor in the market

= Positioning of the competitors

Example

Pric

e le

vel

1

2

3

4

5

1 2 3 4 5

Price Level

3 5

4

6

1 2

Performance


Key aspects of marketing strategy External analysis: Customers (Kano-Model)


Key aspects of marketing strategy Internal analysis: Value Chain

Value chain of a company

Company Infrastructure

Human Resources Management

Research and Development

Procurement

Inbound Logistics

Primary Activities

Supp

ort A

ctiv

ities

Production Outbound Logistics

Marketing, Sales & Distribution

Service

Profit Margin

Finances/Controlling


Key aspects of marketing strategy Internal analysis: Product Life Cycle

1 Date of introduction 4 Initial loss (development costs) 2 Sales maximum 5 Profit threshold 3 Increase due to, e.g., 6 Profit maximum

product enhancements 7 Re-entry into loss zone

Introduction Saturation Maturity Growth

Profit

Time

Sales

7

4

1 5

3 6

2


Key aspects of marketing strategy Internal analysis: Resources and Capabilities

3.  Relative performance in a competitive environment

Factor 1

Factor 4

Factor 5

Factor 6

Factor 3

Relative performance

Impo

rtan

ce

high

low

low high

1. Importance/requirements of the market

2. Absolute assessment and competitive performance from a market point of view

Factor 2

Factor 1

Factor 4

Factor 5

Factor 6

Factor 3

Factor 2 Factor 1

Factor 2

Factor 3

Factor 4

Factor 5

Factor 6

1 2 3 4 5 1 3 5

Scale: 1 = less important 5 = very important Scale: 1 = very bad 5 = excellent


Key aspects of marketing strategy Combine internal & external aspects: SWOT

Internal View

Assets/HR/ Operations

Products

Strengths & Weaknesses

Know-How

Co-operations/ Partner

External View

Customers

Market

Opportunities & Threats

Competitors

Government/ Regulations

Opportunities Threats

Strengths (I) SO-Strategies (II) ST-Strategies

Weaknesses (III) WO-Strategies (IV) WT-Strategies

SWOT-Analysis


Key aspects of marketing strategy SWOT: guiding principles

Opportunities Threats

Strengths

(I) SO-Strategies Use strengths, in order to exploit opportunities on the market.

(II) ST-Strategies Neutralisation or at least mitigation of external threats by deploying internal strengths.

Weaknesses

(III) WO-Strategies Elimination of weaknesses, in order to benefit from new options.

(IV) WT-Strategies Development of defences, in order to ward off external threats, that aim on existing weaknesses.


Key aspects of marketing strategy Is this what strategy implementation is all about?


Key aspects of marketing strategy But even if we have a bulk of data – does it help us?

“Strategy Implementation? Yes, its goal driven not measurement driven”

- Bill Holstein, Harvard University

"Measure what is important, don't make important what you can measure“

– Robert McNamara advising his air force chiefs, when he discovered that they were using the number of buildings

destroyed by bombs as a critical success factor

“What gets measured gets done”

– Robert Kaplan, Harvard University

“In god we trust, all others bring data”- W. Edwards Deming


Key aspects of marketing strategy Getting strategy into action – balance scorecard


Key aspects of marketing strategy Strategy map (client example)

Achieve sustainable Growth of Market

Capitalization

Empl

oyee

sPr

oces

ses

Cus

tom

ers

Fina

ncia

ls

Increase EBITAOptimize Capital

Employed Grow profitable Sales

Improve ROCE

Create perceived Value Added for the customer

based on competitive and attractive offers

Improve customer relation, image and market presence

Follow key customers

Strengthen technological and commercial competence face to face to the customer

Identify growth segments

Increase market and customer knowledgeAlignment and

optimization of resources and efforts (Regions, Functions, Business

Units)

Increase operational efficiency

Excellence in SEQ and reliability in all

functions

Create motivating and innovative environment

Improve international skills esp. regional management cultureActive HR-

developmentIncrease business, technical and

entrepreneurial competencies

Increase English language skills

Introduce innovative products

and services

Strengthen best practice know how transfer

Ensure availability of products from owned sources

Establish effective regional organization

3. Operational marketing

-  Product decisions



Basics (I)




Strategic marketing


Market research





Product decisions Marketing management process


Product mix Price mix Place mix

Markting mix

Corporate strategy

Marketing and sales strategy

Product

n  Product innovation n  Product variation n  Product differentiation n  Product elimination n  …

Price

n  Pricing n  Price differentiation n  Rebates n  … n  …

Place

n  Sales channels n  Sales organisation n  Sales logistics n  E-Commerce n  …

Promotion

n  Advertising n  Public relations n  Sponsoring n  Direct marketing n  …

Promotion mix

Product decisions Marketing mix



Markting mix

Corporate strategy


Product


Price


Place


Promotion


Promotion mix

Product decisions Marketing mix


Brand

Value added services

Basic services

Packaging / Design of tangible environment

Additional features

Product core (Core features)

Product decisions Components of a product


Areas of product decisions

Product innovation

Product variation

Product differentiation

Product elimination

Brand management

Product decisions Areas of product decisions


Product decisions Product decisions: standardisation or adaptation?

Decision

Theodor Levitt’s Assumption

n Marketers are confronted with a homogenous global village

Theodor Levitt’s Advice

n Organisations should develop standardised products

n Market these products around the globe using standardised advertising, pricing and distribution

Theodor Levitt’s Misconception

n Only a few products that follow a standardisation marketing approach

n  International markets differ in many aspects

n Needs, preferences, etc. are shaped by culture

Advice

n Adjustment to local requirements à global localisation

As much standardisation as possible – as much adaptation as necessary.

Standardisation Adaptation


Product decisions Selected adaptation examples

“Kipferl” became …

“Croissant de Lune” in France

“MR2” had to be changed to “MR” in France

– Adaptation due to language differences – – Adaptation due to values/morals –


Product decisions Evaluation of adaptation elements – environmental sensitivity

Environmental sensitivity = the extent to which products must be adapted to the needs of different markets

n  Insensitive products = do not require significant adaptation to the environments of different markets

n  Sensitive products = necessity to address e.g. country-specific cultural and social conditions

high

low

Product adaptation

needed

low high Environmental sensitivity

A company with insensitive products will spend no/less time determining the specific and unique conditions of local markets because the product is universal. The greater a product’s environmental sensitivity the greater the need for adaptation. Intel

processors

Computers

Food


-  Pricing decisions



Markting mix

Corporate strategy


Product


Price


Place


Promotion


Promotion mix

Pricing decisions Marketing mix


Importance of pricing decisions

Saturation Growth markets

Growing price transparency

Globalisation

Quality comparability of related products

Pricing decisions Importance of prices in a complex environment


Profit

Costs Revenue - Volume Price *

Most important profit driver –

yet quite often neglected

Pricing decisions Profit drivers


Pricing decisions Pricing strategies

Price

Time

Skimming Price

Time

Penetration


Pricing decisions Price differentiation

Price

Volume

Profit

No price differentiation

?

P1

Price

Volume

Price differentiation

Additional Profit

P2

P3

Profit P1


Pricing decisions Price bundles


Pricing decisions Price elasticity

Volume

Price

80

100

10 11

-20%

+10%

Elasticity ε = Δ Volume / Δ Price


Pricing decisions Definition of the demand function in practice

Definition of the demand function

Survey Observation

Experts (Estimation)

Customers (Conjoint-Analysis)

Pricing experiments

Market data


-  Promotion planning



Markting mix

Corporate strategy


Product


Price


Place


Promotion


Promotion mix

Promotion planning Marketing mix


Sender Coding Message Decoding Receiver

Noise

Feedback Effect

Promotion planning Communication process


Promotion planning Coding, decoding and visual illusion


Promotion planning Process for planning communication decisions

Definition of communication objectives and target groups

Execution of budgetingand media planning

Design of communication measures

Monitoring of communication impact (pretest)

Implementation of communication measures

Monitoring of communication impact (posttest)


Promotion planning Categorization of communication objectives according to AIDA

Attention Interest Desire Action

Objectives related to potential Objective related to

market success


Promotion planning Process of budgeting based on communication objectives

Communication Objectives

Communication Measures

Implementation Costs = Provisional Budget

No Budget economically feasible?

Yes Budget Approval


Promotion planning Response patterns

x t , W t x t

W t

t

x t , W t x t

W t

t

x t , W t x t

W t

t

x t , W t x t

W t

t

(a) Delayed total response without wear-out

(c) Delayed successive response without wear-out

(d) Immediate total response with partial wear-out

(b) Immediate total response

with total wear-out

W = Advertising budget at time t t x = Demand at time t t


Promotion planning Criteria for evaluating the various media

Medium

Evaluation Criteria

Popular magazines

Daily newspapers

Tele-vision Radio Movie

theaters Outdoor Internet

Mobile Phones

Ability to precisely define target group + + + 0 + + + + + + + + + +

Possibility to provide more detailed information / appeal to cognitive aspects

+ + + + 0 0 0 0 0 0

Options for visual representation + + + + + 0 + + + + + + 0

Aural reinforcement 0 0 + + + + + + + + + 0 + 0

Cost-effectiveness + + + 0 + 0 + + + +

+ + + Very positive assessment, + + Positive assessment, + Average assessment, 0 Below-average assessment


Promotion planning Communication measures

Print, TV, and Radio Advertising

Outdoor Advertising Internet Advertising

Product Placement

Sponsoring

Corporate Identity

Events Trade Fairs Public Relations

Sales Promotion

Direct Marketing

Mobile Marketing


Promotion planning Example of activation through physically intensive stimuli


Promotion planning Example of activation through erotic stimuli


Promotion planning Examples of using key visuals


Promotion planning Heidi Klum as celebrity endorser for McDonald’s


-  Distribution



Markting mix

Corporate strategy


Product


Price


Place


Promotion


Promotion mix

Distribution Marketing mix


Distribution Overview of sales entities

Sales Entities

E-Commerce-Abteilung

Company-internal Sales Entities

Sales entities independent from the

company

AuthorizedDealers

Affiliated Sales entities

Company-external Sales Entities

(Sales Partners)

Franchise System Partners

Organizational Units IndividualPersons

Manager

Key AccountManager

Head of Sales Department

Wholesalers

Retailers

Field Sales Force

Office Sales Force

Facili-tators

Inter-mediaries

Commission Agents

Broker

Sales Agency

Logistics Service Providers

Field Sales Force Employees

Call Center

E-CommerceDepartment

Commercial Agents

Customer Service

Administrative Back Office

Sales Back Office


Distribution Direct and indirect sales for selected products

ExclusivelyDirectSales

ExclusivelyIndirectSales

Larg

e-sc

ale

Plan

ts

Med

icat

ions

Bus

ines

s an

d M

anag

emen

t Con

sulti

ng

Logi

stic

sS

ervi

ces

Airp

lane

s

Mac

hine

s

Turn

-Key

Hou

ses

Che

mic

al P

rodu

cts

Sho

ckA

bsor

bers

/ D

ampe

rs

Indu

stria

l Ste

el

Cel

lPho

ne C

ontra

cts

Insu

ranc

e

Airl

ine

Trip

s

Cos

tum

eJe

wel

ry

Aut

omob

iles

Clo

thin

g

Boo

ks

Food

and

Bev

erag

es

Indi

vidu

aliz

edPr

oduc

tion

Mat

eria

ls


Distribution Single-tier and two-tier sales channel


Distribution Structure of vertical marketing

End Customers

End customer oriented marketing by manufacturer

(E.g. advertisements for the brands being sold)

Trade marketing by manufacturer

(E.g. special conditions for

sales partners, e.g., dealers)

Vertical Marketing Coordinated end customer-

oriented marketing by manufacturers and sales

partners

(E.g. joint sales promotions activities)

Manufacturer

Sales Partners

End customer-oriented marketing (trade marketing)

by manufacturer

(E.g. bonus program for customers)


Distribution Areas of conflict between companies and their sales partners

44.6

44.2

31.1

49.3

6.8

8.6

15.9

28.3

36.6

12.0

0 10 20 30 40 50 60

Margin of sales partners

Direct sales without sales partners

End customer pricing on the part of sales partners

Effort and expenses invested in marketing the productsif the product range also contains competitor products

Customer service support for the sales partner

Active market development on the part of the sales partners

Forwarding of market information bythe sales partners

Company‘s termsof payment

Company‘s support of the sales partnersduring trade fairs and exhibitions

Services offered bycompany

For example, 49.3% of the companies surveyed felt that the margin of the sales partners isan area is likely to cause conflict.

%


Basics of Marketing Management Q & A


Basics of Marketing Management Have a great time and see you soon in Stuttgart


Prof. Dr. Michael Nagel

DHBW Stuttgart Blumenstraße 25 70182 Stuttgart

T (+49) 711 1849 545 F (+49) 711 1849 559

[email protected] www.dhbw-stuttgart.de

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