Marketing Management
Thinking
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Definition of marketing
management
Marketing management is the
management of the innovation
and imitation processes that
firms use to identify and increase
customer satisfaction and reduce
costs faster than their rivals.
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The Study of Marketing
Management
n
n
The study of the innovative and imitative
ways that firms identify and satisfy
customers.
Ralph Starr Butler’s “Marketing
Management” 1914.
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What-To-Do Lists from the First Marketing Management
Textbook
How to Study the Market
Who are the people that make up the market?
Consideration of those who buy and those who influence the buyer.
Men, women, or children?
Rich or poor?
Occupations.
Environment-city, town, or country dwellers.
Where do they live?
Is market international, national, sectional, or local?
What limits it?
Can it be extended?
Climatic influence.
When do they buy?
Buying seasons.
Extending the seasons.
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When do buyers enter the market?
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What-To-Do Lists from the First Marketing Management
Textbook (Continued)
How to Study the Market
How do they buy?
Is it hard or easy to change buying habits?
Do they buy from dealers or from manufacturers?
Do they expect credit?
Do they buy in large or small quantities?
How much will they buy?
Total consumption of all competing products.
Is the market growing or shrinking?
Total consumption in restricted territory.
Per capita consumption.
Comparison of consumption and production.
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What-To-Do Lists from the First Marketing Management
Textbook (Continued)
How to Study the Market
From whom do they buy?
Total number of competitors.
Resources of each.
Relative strength of competitors.
Prosperity and goodwill of each.
Marketing methods of competitors.
Sales channels.
Prices and profits.
Transportation problems.
Influence on size of market.
Influence on prices, profits, and other selling factors.
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What-To-Do Lists from the First Marketing Management
Textbook (Continued)
Steps in Reaching the Market
1. Selection of trade channels.
2. Determination of sales policies.
Advertising.
Credit.
Price maintenance.
Returned goods.
Guarantees.
Treatment of customers.
3. Charting the cost of marketing.
Complete budget of estimated expenditures, sales and profits.
4. Organization of salesmen and of advertising.
Definite schedules of all forms of selling activity.
5. Coordinating the salesmanship and advertising.
6. Getting distribution and cooperating with dealers.
7. Plan for detailed records of actual expenditure, sales, and profits.
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The Evolution of Thought
n
n
n
n
n
1950-1970 textbooks by McCarthy and
Kotler write about concepts and
methods.
Three concepts are universally presented:
1. The marketing concept
2. The synergy concept
3. The product life-cycle concept
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The Marketing Concept
n
n
n
The firms that flourish focus on
identifying and satisfying customer
needs.
Competition forces sellers to focus on
satisfying the customer.
Firms that market innovations create and
shape customer demand and satisfaction.
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The Synergy Concept
n
n
The firm that creates marketing and
management tactics that fit together well and
coordinates their implementation in the right
order will do much better than the firm whose
tactics and implementation are confused and
disjointed.
Total Quality Management combines the
marketing and synergy concepts.
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Types of Synergy
n
n
n
Served market overlap
Product/service positioning
‘complementarities’
Implementation process coordination
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The Product Life-cycle
n
n
Like a living organism, a product goes
through a birth stage, growth stage,
mature stage and decline stage.
Firms should emphasize different
marketing strategies and tactics at
different stages.
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Product Life-Cycle Stages and Marketing Tactics
Sales
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Redirect focus and
promotion
Invest in expanding
production
Build inventory
Expand distributor
network
Train expanded sales
force
Institute marketing
controls
Invest heavily in
advertising
Target best prospect:
innovators and
enthusiasts
Use most loyal
distributors
Use free samples
Public demonstrations
and trade shows
Publicity and
endorsements
Bed down quality
control
Make final product and
service modifications
Use specialist media and
catalogs
Launch
Takeoff
Rapid expansion of
distributors
Product line expansion
Niche marketing
Continued heavy
promotion
Sales force incentives
and management
Encourage referrals
Search for new sources
of supply
Need to balance supply
and demand
Stock out and back
order damage control
Strongly defend homemarket niches
Prune product lines
Emphasize gross
contribution rather
than market share and
sales volume
Review logistics: prune
costs
Reduce pioneering sales
force effort, more
telemarketing
More trade than
consume promotion
Introduce flankers,
private labels, generics
Reinvest in market
research and R&D
Use promotions to
increase heavy-user
loyalty
Cut low gross margin
products from the line
Withdraw from
channels in order of
their unprofitability
Freeze R&D and
product modifications
Freeze advertising and
promotions
Attempt to maintain
price to the end
Buy back remaining
stock and redistribute
Maintain spare parts
and service
Consider divesting
while it is still a going
concern
Freeze investment in
plant
Productivity review
Special trade
promotions to keep
channels happy
Focused attacks on
vulnerable competitors
Long-term price
reduction or at least a
short-term price
promotion
Keep plant at maximum
capacity and
subcontract excess
Rapid Growth
Shakeout Maturity
Decline
Time
New Thinking in Marketing:
The Delta Paradigm
n
n
n
How and why is the market changing?
What is driving the change?
Markets are becoming hypercompetitive:
when several sellers are aggressively
innovating new products, distribution
channels and cost-cutting processes, and
quickly imitating successful innovations.
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Three Basic Competitive Drives
n
n
n
Drive to improve customer satisfaction
through increasing quality and reducing
price.
Drive to reduce costs by increasing
process efficiency without reducing
output quality.
Drive to improve the speed and
adaptability of key processes.
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The Macro and Micro Theories of Competitive Rationality
Buyers’ preferences and wants
are always being changed by
changes in supply.
The economic
process changes
the economic
structure. The
economic structure
changes the social
structure.
Sellers who can
implement their
innovations and
imitations faster are
more competitive.
Macro
Competitive
Rationality
The variation in
consumer demand is
constantly changing
The variation in the
supply offering is
constantly changing
Supply will shift to
serve the demand of
the most profitable
market segments
Effective product and
process innovations are
quickly imitated and
improved
Sellers are driven by
competition to
experiment with new,
innovative ways of
serving customers
Markets are always
in disequilibrium.
Competition
increases when
supply exceeds
demand.
Sellers who possess
an insatiable selfimprovement drive
are more
competitive.
Sellers learn directly
and by observing other
sellers how to serve
customers more
effectively
Sellers with more acute and
less biased perceptions of
how the market is changing
are more competitive.
Micro
Competitive
Rationality
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The Perpetual Motion Machine That Increases the Efficiency of Free Markets
Buyers’ preferences and wants are always being
changed by changes in supply
The variation in
supply offering is
constantly changing
The three competitive
rationality drives
accelerate the flow
The variation in
consumer offering is
constantly changing
Suppliers’ products and processes are always
being changed by changes in demand
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Competitive Rationality
n
n
The competitive thinking and marketing
decision making of a firm in a
competitive market.
Great marketing entrepreneurs are
driven, possess great alertness and
insight, and introduce new ways of doing
things quickly.
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General Theory of Competitive
Rationality
n
n
Variations in the response rate of buyers
and sellers to changes in supply and
demand create opportunities that are
exploited by the marketing entrepreneur.
Changes in economic processes drive
changes in the economic and sociopolitical structure.
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Common Elements in the Marketing Skills of Great
Entrepreneurs
1. They possess unique environmental insight, which they use to spot
opportunities that others overlook or view as problems.
2. They develop new marketing strategies that draw on their unique
insights. They view the status quo and conventional wisdom as
something to be challenged.
3. They take risks that others, lacking their vision, consider foolish.
4. They live in fear of being preempted in the market.
5. They are fiercely competitive.
6. They think through the implications of any proposed strategy,
screening it against their knowledge of how the marketplace
functions. They identify and solve problems that others do not
even recognize.
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Common Elements in the Marketing Skills of Great
Entrepreneurs (Continued)
7. They are meticulous about details and are always in search of
new competitive advantages in quality and cost reduction,
however small.
8. They lead from the front, executing their management strategies
enthusiastically and autocratically. They maintain close
information control when they delegate.
9. They drive themselves and their subordinates.
10. They are prepared to adapt their strategies quickly and to keep
adapting them until they work. They persevere long after
others have given up.
11. They have clear visions of what they want to achieve next. They
can see further down the road than the average manager can
see.
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Mental Model of the Market
n
n
n
How the development team collectively
“thinks” about the market. How it
frames and organizes its thinking. How
the “spin” is put on new events and facts.
How market research should scan the
market and present intelligence to team.
Used as the basis for assessing the fit
between the organization and its
environment.
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