INTRODUCTION TO THE COURSE SYLLABUS & SUPPORT MATERIALS ARE AT http://awhitebread.ba.ttu.edu alan.whitebread@ttu.edu MARKETING 3350 • TESTS 100% – 5 total – best 4 test scores will determine your grade for the course. – No make-up tests! – No extra credit! Knowledge + logic + understanding = No guesses COURSE STRUCTURE • Business casual environment • Prepare for class everyday – slides, text, and vocabulary • Attend all classes • Bring printout of slide and take good handwritten class notes • Participate – Your comments and questions, in-class activities • Form opinions based on facts and analysis • Review website items KEY LEARNING OUTCOMES Understand • the role of marketing as the hub of the wheel, • the importance of aligning corporate offerings with market wants and needs, • the role of the chief marketing officer, • the many functional areas of marketing, and introduce the major marketing concepts, models, and theories. KEY LEARNING OUTCOMES • Marketing has many components that need to be coordinated and integrated to maximize your chance for success. • There is a logical sequence to developing marketing programs and the importance of research to making good decisions. • There are many marketing concepts and theories that are relatively easy to understand but are difficult to implement. • New product development [NPD] is critical to the continuing success of the firm and how marketing manages the NPD cycle. KEY LEARNING OUTCOMES • For career success, students must become very flexible [recognize an item or situation even if it has a different name] and adaptable [take a basic concept, model, or theory and modify or apply it to a specific situation] to succeed in the business world. • Also for career success, students must become comfortable making decisions based on incomplete and sometimes uncertain information! 1 THE HUB OF THE WHEEL AND CONNECTING WITH CUSTOMERS LIFETIME VALUE • • • • • • How often do you purchase a box of Kleenex? Which translates to n boxes per year. At what average unit selling price [AUP]? Which produces $ annual revenue [Ryr]. Build the equation for annual revenue. Times your remaining average lifespan [80-20] of x years that amounts to $ lifetime revenue [Rl]! • At 33% gross margin percent [GM]. Note GM=[P-C]/P • Which results in $ gross profit [Plp] over your lifetime! • Build the equation for life time value. LO1 WHAT IS MARKETING? DELIVERING BENEFITS Marketing Seeks to: • Discover and Satisfy Needs and Wants of Markets and Market Segments. • Markets and market segments are composed of customers, prospects, and suspects. AMA DEFINITION OF MARKETING “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” -American Marketing Association, 2007 THE MARKETING ENVIRONMENT Social / Cultural Technological Attitudes, Values, Lifestyle Human Resources Marketing Mix Senior Management & Organization Structure Environmental / Natural Forces Stakeholders Capital Supply Chain Management Planning and Systems Competition Government / Political / Legal LO1 WHAT IS MARKETING? REQUIREMENTS FOR IT TO OCCUR Parties with Unsatisfied Needs A Desire and Ability to be Satisfied A Way to Communicate Something of Value to Exchange 1-12 HOW MARKETING DISCOVERS CONSUMER NEEDS LO2 THE CHALLENGE: NEW PRODUCTS Most New Products Fail The Challenge: • “Focus on the Consumer Benefit” • “Learn From the Past” • 1-13 LO2 HOW MARKETING DISCOVERS CONSUMER NEEDS NEEDS VS. WANTS • • B2C:shaped by culture and personality • B2B [organizational buyers] shaped by requirements] LO2 HOW MARKETING DISCOVERS CONSUMER NEEDS • MARKETS [for products and/or services] – Defined groups of people or entities with both the desire and the ability to buy a specific product. • – [Preferably] uniquely defined groups within markets. • – Those market segments the entity is / will actively pursue. • – The entity’s per cent of the total market in units or revenue. MARKETS AND STAKEHOLDERS • MARKETS [for products / services] – – – – – – Business Consumer [B2C] Government Reseller International* Institutions [education and health care] – Non-profit – Captive • STAKEHOLDERS or PUBLICS [some interest in what you do] – – – – – Customers Prospects Resellers Employees Internal departments / individuals – Investors – and more! LO3 HOW MARKETING SATISFIES CONSUMER NEEDS The Marketing Mix [4Ps] PRODUCT PROMOTION PLACE PRICE MARKETING PROGRAM LO4 CUSTOMER VALUE AND RELATIONSHIPS • VALUE – THE CORNERSTONE OF MARKETING • The difference between usage value and the cost of procurement. – – – Customer satisfaction [positive customer experience] • – – 1-18 MARKETING PROGRAM LO4 CUSTOMER VALUE AND RELATIONSHIPS Customer Value & Its Perception Value Strategies – It’s all about being perceived differently! • Best? Price • Best? Product • Best? Service LO4 MARKETING PROGRAM RELATIONSHIP MARKETING Relationship Marketing • Easy to Understand - • Customer Relationship Management [CRM] Marketing Program 1-20 MARKETING MANAGEMENT PHILOSOPHIES • PRODUCTION ERA – – Products that are available and highly affordable – Products with the most performance and features They will buy it if we build it. • SALES ERA – Sales are driven by advertising & promotion You will sell what we make. CONTRASTING CONCEPTS Starting point Focus Means Ends Factory Existing products Selling and promotion Profits through sales volume Market Customer needs Integrated marketing Profits through customer satisfaction THE MARKETING CONCEPT AT WORK MARKETS AND SEGMENTS CONSUMER NEEDS INTEGRATED MARKETING COMMUNICATIONS VERSUS THE SELLING CONCEPT WHICH EMPHASIZES COMPANY NEEDS PROFITS THROUGH SATISFACTION MARKETING MANAGEMENT PHILOSOPHIES • MARKETING CONCEPT ERA – Market [customer]-driven approach We will make it if we believe we can sell it in sufficient quantity • CUSTOMER RELATIONSHIP ERA – Mutually-satisfying long-term relationships [relationship marketing] ETHICS & CORE VALUES • MORALS The distinctions between right and wrong. • ETHICS The values relating to human conduct—the right and wrong of actions, and the good or bad of motives and ends. ETHICS • Personal ethics should exceed legal requirements • If you have to ask about its legality, you are likely in ethical trouble • • LO6 HOW MARKETING BECAME IMPORTANT BREADTH AND DEPTH OF MARKETING Who Benefits? Who Buys & Uses What Is Marketed? • • How Do Consumers Benefit? • • 1-27 PLANNING • STRATEGIC – • MARKETING – Generally one year or less • TACTICAL – Generally days, weeks, or months PLANNING AND THE FIRM Vision Core values Business definitions and missions Strategic direction [leadership] Infrastructure [core competencies] SBUs Marketing plan Objectives & Situation analysis Segmentation and target marketing Positioning Marketing mix Product – Place – Promotion – Price [value] STRATEGIC PLANNING • The process of aligning the firm’s capabilities over the long term to take advantage of constantly changing market opportunities. • The goal is usually maximization of the firm’s revenues, profits, and / or the accomplishment of major objectives. • There are several excellent models. The challenge is to apply the most appropriate model for your situation. STRATEGIC PLANNING • • • • What are we now? What capabilities do we want to develop? What businesses should we be in? How do we get there? – – • What are the rewards of success? 2 STRATEGIC PLANNING, CORPORATE GOALS, AND CORE COMPETENCIES LO1 TODAY’S ORGANIZATIONS KINDS OF ORGANIZATIONS Business entities For-profit organizations LO1 TODAY’S ORGANIZATIONS WHAT IS STRATEGY? Strategy Marketing’s Role 2-34 HOW DOES MARKETING MEET CORPORATE GOALS? • REVENUE AND NET PROFIT • BRAND AWARENESS • NEW PRODUCT / MARKET DEVELOPMENT THE MARKETING ORGANIZATION WORKING RELATIONSHIPS STRATEGIC DIRECTION OF THE FIRM BOARD / CEO / COO MARKETING OFFICER THE MARKETING PLAN PRODUCT MARKET CUSTOMER MANAGEMENT RESEARCH SERVICES PRODUCTS & SERVICES PRICING CHANNEL MANAGEMENT SALES FORCE DIRECTION BRAND MANAGEMENT CUSTOMER SURVEYS NEEDS RESEARCH CUSTOMER CARE INTEGRATED MARKETING SALES SALES ORGANIZATIONS COMMUNICATIONS ADVERTISING SALES MANAGEMENT PROMOTION DAILY SALES PUBLIC RELATIONS ACCOUNT MANAGEMENT SALES MATERIALS CUSTOMER RELATIONSHIPS TYPES OF SALES ORGS. DESIGNING THE BUSINESS PORTFOLIO • • • • CORE COMPETENCIES • CONSIDERATIONS – FIT WITH OTHER SBU’s – SYNERGIES – COMPETITION BETWEEN SBU’s STRATEGIC DIRECTION OF THE FIRM (“THE CORE COMPETENCE OF THE CORPORATION” ARTICLE) • CORE COMPETENCY TESTS • Sustainable – • Competitive – • Advantage – LO1 TODAY’S ORGANIZATIONS STRUCTURE—SBU Strategic Business Unit [SBU] Level GE Commercial Finance GE Industrial GE Money (business loans, leases) (appliances, lighting, factory automation) (consumer home loans, credit cards) GE Healthcare GE Infrastructure GE NBC Universal (imaging, diagnostics, life-support systems) (aircraft engines, energy, transportation) (television, music, film) THE STRATEGIC BUSINESS UNIT (SBU) • A UNIT OF THE FIRM THAT HAS DIFFERENT OBJECTIVES, CAN BE PLANNED SEPARATELY FROM OTHER UNITS, AND INTERNALLY COMPETES FOR – – FAIR PERFORMANCE MEASURES – DEGREE OF AUTONOMY SBU LO2 STRATEGY IN VISIONARY ORGANIZATIONS FOUNDATION (WHY) Core Values Stakeholders Mission or Vision Organizational Culture 2-42 CORE VALUES are the fundamental, passionate, and enduring principles that guide conduct over time. – Values and beliefs: you can not live a dual life LO2 STRATEGY IN VISIONARY ORGANIZATIONS DIRECTION (WHAT) Business • What do we do we do best? • What business[es] are we in? • What business[es] should we be in? “MARKETING MYOPIA” * THEODORE LEVITT ARTICLE • • Supermarket [1930] • Color TV • Lead with price conundrum • You can always get sales! • Great marketing organizations rarely have financial problems! APPLYING THE MARKETING MYOPIA CONCEPT: BUSINESS DEFINITIONS & EXTENSIONS PRODUCT ORIENTED MARKET ORIENTED DISNEY Theme parks Fantasies & What entertainment businesses are they in? WAL-MART Discount stores Value to middle class COMPANY BUSINESS EXTENSIONS What can they sell? COMPETENCIES / KEY SUCCESS FACTORS • NOT CORE COMPETENCIES • YOU MUST DO BETTER EVERY DAY • • Design • Engineering •? LO3 SETTING STRATEGIC DIRECTIONS Market Growth Rate LOW HIGH Where do we want to go? BCG Growth-Share Matrix STARS QUESTION MARKS CASH COWS DOGS HIGH LOW Relative Market Share GE STRATEGIC BUSINESS PLANNING MATRIX • Market Attractiveness – Market size, growth rate, potential – Competition – Profitability – Government regulation • Business Strength – Market share – Customer & market knowledge – Cost efficiency – Technology GE STRATEGY ANALYSIS Strong Low Medium High MARKET ATTRACTIVENESS BUSINESS STRENGTH Medium Weak Hydraulic pumps Clutches Fuel pumps Valve Invest & grow Selective growth LO3 SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? Hedgehog Analysis • What Are We Deeply Passionate About? • • What Can We Be the Best At in the World? • • What Drives Our Economic Engine? 2-51 LO3 SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? Blue Ocean Analysis • Red Oceans • • • The ocean turns red with blood • Blue Oceans • • • The great blue expanse of opportunity Copyright 2005 W. Chan Kim and Renée Mauborgne 2-52 LO4 THE STRATEGIC MARKETING PROCESS Strategic Marketing Process • How Do We Allocate Our Resources to Get Where We Want to Go? • How Do We Convert Our Plans to Actions? • How Do Our Results Compare With Our Plans, and Do Deviations Require New Plans? 2-53 LO4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 1: Situation (SWOT) Analysis • Situation Analysis • SWOT Analysis 2-54 LO4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 1: Situation (SWOT) Analysis • SWOT Analysis Study Identify Industry Trends Analyze Competitors Assess the Organization Research Present and Prospective Markets 2-55 LO4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE SWOT ANALYSIS Your firm and your major competitors IP STRENGTHS Low cost structure Take advantage of Market position the firm’s strengths CONSTRAINTS Breadth of offering WEAKNESSES Lack of management talent Offset the firm’s weaknesses Weak finances OPPORTUNITIES LEVERAGE NPD New markets, channels Use the firm’s strengths to offset Acquisitions competitive threats VULNERABILITIES THREATS PROBLEMS Counter threats Rapidly changing market New entrants Government regulations LO4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 2: Market-Product Focus and Goal Setting 2-57 COMPETITIVE ADVANTAGE • The target market set[s] of ____________________ features and their associated _____________ benefits _______________________________ compared to the competitive offerings. COMPETITIVE ADVANTAGE OF THE FIRM COMPETITIVE ADVANTAGE Customer Perceived Uniqueness C O M P E T I V E S C O P E INDUSTRY Low Cost Position DIFFERENTIATION WIDE NICHE / FOCUS OVERALL COST LEADERSHIP LO5 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 3: Develop the Marketing Program • Product Strategy • Price Strategy • Promotion Strategy • Place (Distribution) Strategy 2-60 LO5 THE STRATEGIC MARKETING PROCESS THE IMPLEMENTATION PHASE Obtaining Resources Designing the Marketing Organization Developing Schedules Executing the Marketing Program • Marketing Strategy • Marketing Tactics 2-61 LO5 THE STRATEGIC MARKETING PROCESS THE EVALUATION PHASE Comparing Results with Plans to Identify Deviations • Planning Gap Acting on Deviations • Exploiting a Positive Deviation • Correcting a Negative Deviation 2-62 3 SCANNING THE MARKET ETHICS ENVIRONMENTAL SCANNING LO1 Environmental Scanning • Tracking Trends • 3-64 LO2 SOCIAL FORCES DEMOGRAPHICS Social Forces Demographics • World Population • U.S. Population 3-65 LO2 SOCIAL FORCES DEMOGRAPHICS—GENERATIONAL COHORTS Baby Boomers: 1946 - 1964 Generational Marketing [B2C] 3-66 LO2 SOCIAL FORCES DEMOGRAPHICS—POPULATION SHIFTS Statistical Areas (SA): Illinois • Combined SA: NE Illinois • Micropolitan SA: Dixon, IL • Metropolitan SA: St. Louis, MO & SW IL • Metropolitan Division: Chicagoland 3-67 SOCIAL FORCES LO2 DEMOGRAPHICS—RACIAL & ETHNIC DIVERSITY Composition Trends • African Americans • Hispanics • Asian Americans Multicultural Marketing 3-68 SOCIAL FORCES LO2 CULTURE Culture The Changing Attitudes and Roles of Men and Women Changing Values • Value Consciousness 3-69 LO3 ECONOMIC FORCES MACROECONOMIC CONDITIONS Economy • Inflation • Recession 3-70 LO3 ECONOMIC FORCES CONSUMER INCOME Gross Income is the total amount of money made in one year without Disposable Income is the money a consumer has left after Discretionary Income is the money that remains after paying for taxes and 3-71 LO4 TECHNOLOGICAL FORCES ELECTRONIC BUSINESS TECHNOLOGIES Electronic Commerce 3-72 PORTER’S FIVE FORCES MODEL: Industry Analysis What is the threat of significant What is the bargaining power of What is the amount of rivalry What is the bargaining power of What is the threat of See Michael E. Porter, Competitive Strategy, New York Free Press, 1980, for more information. LO6 REGULATORY FORCES FEDERAL LEGISLATION Regulation Protecting Competition • Sherman Antitrust Act (1890) • Clayton Act (1914) • Robinson-Patman Act (1936) 3-74 REGULATORY FORCES LO6 FEDERAL LEGISLATION Product-Related: Company Protection • Copyright Law • Trademark Law • • 3-75 REGULATORY FORCES LO6 FEDERAL LEGISLATION Pricing-Related Distribution (Place)-Related • Exclusive Dealing • Requirement Contracts • • 3-76 FIGURE 4-1 Four ways to classify marketing decisions according to ethical and legal relationships. 4-77 LO2 ETHICAL MARKETING BEHAVIOR BUSINESS CULTURE AND INDUSTRY PRACTICES Business Cultures Ethics of Exchange • • Consumer Bill of Rights (1962) codified the ethics of exchange between buyers and sellers • U.S. Consumer Product Safety Commission • Federal Trade Commission (FTC) 4-78 LO2 ETHICAL MARKETING BEHAVIOR BUSINESS CULTURE AND INDUSTRY PRACTICES Ethics of Competition • • Bribes and Kickbacks • 4-79 4 CONSUMER MARKETING [B2C]; MARKETS & BUYER BEHAVIOR WHAT IS A CONSUMER? • The ultimate user that selects, purchases, uses, and disposes of goods or services to satisfy needs and wants. A MODEL OF BUYER BEHAVIOR Product Price Marketing and Other Stimuli Economic Technological Place Political Promotion Cultural Buying Decision Process Product Choice Brand Choice Dealer Choice Buyer’s Black Box Buyer Characteristics Buyer’s Response Purchase Timing Purchase Amount PURCHASE DECISION PROCESS CONSUMER BAHAVIOR – PROBLEM RECOGNITION FIGURE 5-1 The purchase decision process consists of five stages. FEEDBACK 5-83 LO1 PURCHASE DECISION PROCESS INFORMATION SEARCH Internal Search External Search Personal sources Public sources Market-dominated sources 5-84 LO1 PURCHASE DECISION PROCESS ALTERNATIVE EVALUATION Evaluative Criteria Factors that represent both the objective attributes of a brand and the subjective ones a consumer uses to compare different products and brands. Consideration Set the group of brands that a consumer would consider acceptable from among known brands in the product class. 5-85 LO1 PURCHASE DECISION PROCESS PURCHASE DECISION Decide from Whom to Buy Decide When to Buy 5-86 CUSTOMER FOCUS THE VALUE OF A SATISIFIED CUSTOMER • Customer retention [satisfaction] • • • AFTER THE PURCHASE: POSTPURCHASE BEHAVIOR Consumer’s Expectations of Product Quality and Performance Product’s Perceived Performance Standard Satisfied Customer! Dissatisfied Customer CLASSIFICATION OF CONSUMER PRODUCTS Convenience Products Shopping Products > Frequently purchased > Little effort > Low priced > Numerous locations > Considerable selection time & effort > Moderately brand loyal > Comparison shop > Few locations Staples, impulse items Clothing, appliances, services Specialty Products Unsought Products > Unique characteristics > Significant purchase efforts > Brand – limited locations > Little awareness or interest until need > Require much advertising & personal selling Big Bertha golf club, Rolex Insurance, some innovations > Unexpected need > Speed with little to no brand loyalty Emergency room, ambulance, towing LO2 PURCHASE DECISION PROCESS CONSUMER INVOLVEMENT & PROBLEM SOLVING Involvement is the personal, social, and economic significance of the purchase to the consumer. • Extended Problem Solving • Limited Problem Solving • Routine Problem Solving 5-90 PURCHASE DECISION PROCESS LO2 INVOLVEMENT & MARKETING STRATEGY Low Involvement • Maintain Product Quality • • High Involvement: Use Ads and Personal Selling 5-91 LO2 PURCHASE DECISION PROCESS SITUATIONAL INFLUENCES • SOCIAL SURROUNDINGS • – What do you notice when you go into a store? • – Does the time of day affect your shopping? – How do you shop if you are in a hurry? • – How does being unhappy affect your shopping? – How does the amount of money you have … FOUR TYPES OF BUYING DECISIONS HIGH INVOLVEMENT [Quality – Service – Facts] Use personal sales – quality, facts, service Significant differences between brands Behavior Few differences between brands Behavior DURABLE GOODS [Furniture, appliances, long-lasting items…] Use subjective appeals, advertising LOW INVOLVEMENT [Obvious differences] Use advertising, POP, emotional perceptions Behavior Behavior NON-DURABLE GOODS [Grocery items, frequent purchases, …] Use sales promotion, price PSYCHOLOGICAL INFLUENCES ON CONSUMER LO3 BEHAVIOR: MOTIVATION AND PERSONALITY Maslow’s Hierarchy of Needs 5 Selfactualization Personal improvement, legacy, philanthropy Rawls College of Business (self-development and realization) 4 (self-esteem, recognition) Designer items Hilfiger, BMW, … 3 (friendship, belonging, love) 2 1 Cards, flowers Hallmark, Carnival, … (safety, financial security, protection) (Food, water, shelter, Advil-advanced medicine for pain) Insurance Allstate PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOR LO3 MOTIVATION AND PERSONALITY Personality 5-95 LO3 PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOR PERCEIVED RISK Strategies to Reduce Perceived Risk • Obtain Seals of Approval • Secure Endorsements • Provide Free Trials/Samples • Give Extensive Instructions • Provide Warranties/Guarantees 5-96 LO3 PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOR LEARNING Behavioral Learning • Drive (Hunger) • Response • Cue • Reinforcement Cognitive Learning 5-97 LO3 PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOR ATTITUDES AND BELIEFS Attitude Formation • Attitude – • Values – • Beliefs 5-98 LO3 PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOR ATTITUDES AND BELIEFS Attitude Change • Change Beliefs About a Brand’s Attributes • Changes Perceived Importance of Attributes • Add New Product Attributes 5-99 PSYCHOLOGICAL INFLUENCES ON CONSUMER LO3 BEHAVIOR: CONSUMER LIFESTYLE ACTUALIZERS 11.7% Guided by Knowledge and Achievement: success Guided by selfexpression: FULFILLEDS 10.5% ACHIEVERS 14.7% EXPERIENCERS 12.9% BELIEVERS 17.0% STRIVERS 11.8% MAKERS 12.0% Principle STRUGGLERS 9.5% LO4 SOCIOCULTURAL INFLUENCES ON CONSUMER BEHAVIOR PERSONAL INFLUENCE Opinion Leaders Word of Mouth 5-101 SOCIOCULTURAL INFLUENCES ON CONSUMER BEHAVIOR FAMILY INFLUENCE FIGURE 5-6 Modern family life cycle stages and flows Family Decision Making 5-102 LO4 SOCIOCULTURAL INFLUENCES ON CONSUMER BEHAVIOR SOCIAL CLASS Social Class • Upper Class • Middle Class • Working/Lower Class 5-103 LO4 SOCIOCULTURAL INFLUENCES ON CONSUMER BEHAVIOR CULTURE AND SUBCULTURE Culture Subculture • Hispanic Buying Patterns • African American Buying Patterns • Asian American Buying Patterns 5-104 IS THEIR REALITY!