Introduction to Marketing
University of Chicago
Marketing Management
Company Orientations Towards the
Marketplace
Orientation
Description
Relative Time
Span
Basic Managerial
Objective
Production
Transition from Home
Manufacturing to Factories
Industrial
Revolution
Profit Maximization via
Economies of Scale
Product &
Financial
Focus on Product Development,
Performance and Features and
the Growth of Large Scale
Industrial Empires
Profit Maximization
Through Superior
Product Performance
Sales
Transition from Scarcity of
Goods to Scarcity of Markets;
Market Saturation with Basics
Profit Maximization via
Demand Generation
Marketing
Transition from Internal
(Organization) to External
(Customer) Basis for Guiding
Marketing Decisions
1990s
Profit Maximization via
Matching of Products to
Customer Wants
The Marketing Concept
A Customer Orientation
Backed By Integrated Marketing
Aimed at Generating Customer
Satisfaction and Repurchase As The Key To
Satisfying the Organizations Goals
The Marketing Concept (Contd..)
Focus
Means
End
Sales Concept
Products
Selling &
Promotion
Profits Through
Sales Volume
Marketing
Concept
Customer Needs
Integrated
Marketing
Profits Through
Customer
Satisfaction
Wordof- Mouth
Stages in Consumer Decision
Process
Awareness
Advertising
Interest
Channel
Decision
Product /
Service
Action
Price
Satisfaction
Profits Through Customer Satisfaction
(One Customer)
Referrals
Price Premium
Reduced Selling Effort
Increased Usage
Normal Profits
Acquisition Costs
Time
Dollars($)
60
40
20
Credit Card
Customer
0
-20
-40
-60
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Customers
• Cost of Lost
Customers
• # Accounts = 64000
• Loss = 5% for poor
service = 3200
accounts
• Loss in Revenue /
Account = $40000
• Total Revenue Loss =
$ 128 MM
• Cost of Average Sales
Call = $300
• Average # Calls to
Convert Customer = 4
• Cost of New Customer
= $1200
• Annual Revenue from
Customer = $5000
• # Loyal Years = 2
• Profit Margin = 10%
• Lifetime Value = $1000
Cost of Losing and Attracting
Customers
• Cost of attracting a new customer can be upto
5 times the cost of keeping a current one
happy
• Cost of Offensive Marketing > Cost of
Defensive Marketing
• Some companies have increased profits from
25% to 85% by
reducing defections by 5%
Developing An Effective
Marketing Plan
•
•
•
•
Conduct A Marketing Review
Build A Marketing Strategy
Implement Strategy Via Marketing Mix
Evaluate The Success Of The Marketing
Plan
Conduct A Marketing Review (3C Analysis)
A. Analysis of
CUSTOMER
Trends, Needs,
Perceptions,
Behavior
B. Assessment of
COMPANY
Capabilities and
Current Marketing
Position
Opportunity Identification
C. Analysis of
COMPETITORS
Current Position,
Capabilities,
Actions
Build A Marketing Strategy
Generic Strategies For
DIFFERENTIAL
ADVANTAGE
* Product Differentiation
* Cost Leadership
* Special Market Focus
Selection of
TARGET MARKET
and Development of a
POSITIONING
STATEMENT
Implementation: The Marketing
Mix (Four P’s)
• Product
• Price
• Place
• Promotion
3C - 4P Framework
• Customer
• Company
• Competitor
• Product
• Price
• Promotion
• Place
3C - 4P Framework
BMW
Colgate
IDS
PDA /
Infiniti
Sealed-Air
Barco
• Customer
• Company
• Competitor
• Product
Nestle
• Price
Rohm&Haas
• Promotion
Intel
• Place
Dell
Marketing System
Long Term Factors
Technological
Short Term Controllable Factors
Economic
Product
Place
Price
Promotion
Socio / Cultural
Legal
Recasting the 3C - 4P Framework in
Value Terms
• Customer
• Company
• Competitor
• Product
• Price
Creating
Value
Capturing
Value
• Place
• Promotion
Communicating
Value
Mapping Value Migration
• Limited competition
• High growth
• High profitability
• Competitive stability
• Stable market share
• Stable margins
Market 2
Value 
Revenues
In the outflow stage,
talent, resources &
customers leave at an
accelerating rate
• Competitive intensity
• Declining sales
• Low profits
1
Value Inflow
Value Stability
Value Outflow
Capturing Value Growth
Map Changing Customer Priorities
2001
1998
Identify New Business Designs
.
1.
2.
3.
New Entrant
.
1.
2.
3.
New Entrant
Old
Key elements
New
.
.
Assumptions
Compare Business Designs
Build New Business Designs to Capture Growth
Coffee Shops &
Office Coffee
Gourmet
Cafes
Traditional
Grocery Blend
.
Whole bean
Gourmet Coffee
1. Quality
2. Freshness
3. Close to office
1985
1. Price
2. Ease of purchase
3. Uniform offering
Affordable
Luxury
Value Migration in Coffee 1990
Coffee is Coffee
Starbucks
..
.
GCA
Millstone
Gloria Jean’s
Starbucks
.. .
.
Folgers
Maxwell House
Nestle
Value Migration
Phases
Millstone
Folgers
Chock Full O’ Nuts
Value Inflow
Value Stability
Value Outflow
Replaying the Game
• P&G: “We sell coffee” vs. “We sell canned coffee of
moderate quality in groceries”
• The brand we have built to sell mid-tier coffee will not cater
to gourmet coffee position as its made of Robusta rather
than Arabica beans. So we need to launch a new brand that
preempts the quality position. We may need a new design
(DSD), but we’ve done radical stuff before!
• Most restaurants, food chains and institutions sell Coke or
Pepsi (branded) but unbranded coffee. Once our gourmet
brand is established in grocery stores, we may be able to
move into the institutional market (after all, we sell to WalMart!)
• Whole bean provider: Could have built a brand by opening
a café division. Took 7 years for Brothers to catch on. By