Module 4 - Marketing Management - Mba Crash Course

MBA Master of Business Administration

Crash Course “To reach our greatest potential, we must set our sights clearly and embrace the unknown confidently”

The National Organization of Certified Public AccountantsAn association of institutional, professionals, and OFWs Riyadh Chapter, Kingdom of Saudi Arabia Riyadh, Kingdom of Saudi Arabia

MODULE 4 MARKETI NG MANAGEMENT

PURPOSE OF BUSINESS

CUSTOMERS

BUSINESS SUCCESS

BUSINESS SUCCESS Create and maintain value for stakeholders

Employees Managers Shareholders

Suppliers Creditors Investors

BUSINESS SUCCESS

PURPOSE OF BUSINESS PURPOSE OF BUSINESS CREATE & KEEP CUSTOMERS

PETER DRUCKER “Revered as father of Modern Day Management”

MARKETING IS THE PROCESS BY WHICH THIS IS ACHIEVED

CRITERIA FOR BUSINESS SUCCESS INCREASED PERFORMANCE PURSUED IN TWO (2) FOCI BUSINESS DO IT BETTER

Extract more value from existing customers

Maintain Output

Enhance Customer Satisfaction

Reduced Input

BUSINESS CAN DO MORE

Attract more customers

Incremental Input

INPUT Increased Output

Enhance Customer Satisfaction

OUTPUT BUSINESS PERFORMANCE=DIRECT FUNCTION OF MARKETING EFFECTIVENESS

LEARNING FROM FAILURE Mardikakis M – Long Range Planning Example: Exxon, IBM, Texaco, Union Carbide

CAUSES OF CORPORATE FAILURE Natural Process Organizational arteriosclerosis Taking risks Overextending resources & capabilities Being overoptimistic Ignoring or underestimating competition Preoccupation with short term Believing in quick fixes Relying on barriers to entry Overreacting Personality and ability of CEO Bad Luck Incompatibility

MARKETING REVOLUTION THE MARKETING MYOPIA – BUSINESS FAILURE Theodore Levin’s Article – Harvard Business Review

PRODUCT ORIENTED RATHER THAN CUSTOMER ORIENTED FORCED BUSINESS IN 1960’s

FOCUS ON CUSTOMER NEEDS AND BE MARKETING LED

MARKETING REVOLUTION ENVIRONMENTAL PRESSURES THAT LED TO MARKETING REVOLUTION

Faster Technological Change Shift to Slow Growth Economy Third World Economic Capability Fluctuating Exchange Rate Communication & Information Trend Changes in Social Order

MARKETING CHALLENGES Ability to powerfully communicate your business with laser precision and your ability to deliver a clearly-defined and consistent experience BRANDING Create a deep connection with your core target audience - your potential raving fans! – TARGET MARKET - SEGMENTS

Design compelling offerings that pull customers in like a magnet – OFFERINGS PORTFOLIO 80% of all purchase decisions are based on emotion. Availability of a Marketing Plan - ROADMAP 90% of small business owners do not have a plan

MARKETING CHALLENGES David Lowndes Director of Product Development for Comac, Inc

Increased specialization of Customer Needs “Mass Marketing” – “One size fits all”

New Communication Channel Use of different medium to reach consumers

MARKETING CHALLENGES David Lowndes Director of Product Development for Comac, Inc

Increased Competition for Customer Dollars “Growing global economy – more competitors”

Shorter Product life Cycle Technology- reaching customers quickly – creating new products”

MARKETING CHALLENGES David Lowndes Director of Product Development for Comac, Inc

Legislation and Regulatory Restrictions “Imposition of regulations Standards”

MARKETI NG VS SELLI NG

MARKETING VS. SELLING MARKETING

Determine needs and wants of target market. Deliver desired satisfaction efficiently and effectively.

SELLING

Customers ability to buy or not buy. Stimulate consumers interest to the products.

MARKETING VS. SELLING MARKETING CONCEPT

SELLING CONCEPT Product Planning and Development

Discovers Market Needs Research

Production

Product Planning and Development

Promotional Methods and Selling

Production

Persuasive Techniques

Distribution of Products and Services

Distribution of Products and Services

Guaranteed Sales Volume and Profits Customers Satisfaction

UnGuaranteed Sales Volume and Profits Customers Satisfaction

MARKETING – OPERATIONAL DIMENSION Target Market

MARKETING SYSTEM Things to be Marketed

Marketing Organizations

MARKETING CORE CONCEPTS Management Guidance to achieve and maintain market share, growth and profitability

Customer Orientation Integration Effort Competitive Advantage Segmentation and Positioning Environmental Awareness

MARKETING CORE CONCEPTS Customer Orientation High Production and Distribution Efficiency = Low Cost and Better Offering

“We sell what we make”

NOT

“We make what we sell”

Production Orientation

Selling Orientation

Customer Orientation

Product Orientation

Determines Needs & wants and delivering desired satisfaction

Good products and continuous improvement

MARKETING CORE CONCEPTS Integration Effort BUSINESS KEY TASK: CREATE AND HOLD CUSTOMERS

DEPARTMENT’S SUPPORT

TOTAL OFFERINGS

MARKETING CORE CONCEPTS Competitive Advantage

BUILD ON ADVANTAGES TO MINIMIZE DISADVANTAGES

MARKET SHARE : NOT THE ONLY MEASURE TO DETERMINE COMPETITIVE POSITION

MARKETING CORE CONCEPTS Competitive Advantage PETER DOYLE – Professor of Marketing & Strategic Management UNIVERSITY OF WARWICK MEASURES USED BY AMERICAN AND JAPANESE BUSINESSMEN TO EVALUATE PERFORMANCE

Increase in Market Share New Product Ratio Return on Investment Capital Gain for Shareholders

MARKETING CORE CONCEPTS PETER DOYLE – Professor of Marketing & Strategic Management UNIVERSITY OF WARWICK MEASURES USED BY AMERICAN AND JAPANESE BUSINESSMEN TO EVALUATE PERFORMANCE

3 2.5 USA

2 1.5 JAP

1

JAP

USA

JAP USA

0.5 JAP

USA

0 ROI

CAPITAL GAIN

MKT SHARE PROD. RATIO

MARKETING CORE CONCEPTS Segmentation and Positioning SEGMENTATION Identifying homogeneous market and subdividing them by applying variables POSITIONING Choice of target market segment Determine where business will compete Choice of differential advantage Dictate how business competes

MARKETING CORE CONCEPTS Environmental Awareness ORGANIZATION

Recognizing and responding profitably to unmet needs and trends of the environment.

MARKETI NG DECI SI ONS

FOUR CORE AREAS MARKET SEGMENTATION

MARKET PLANNING

MARKETING DECISIONS

MARKET POSITIONING

SELECTING TARGET MARKET

MARKET SEGMENTATION IMPORTANCE OF MARKET SEGMENTATION Better matching of customers’ needs Enhanced profits Enhanced opportunities for growth Retain customers Targeted communication Market segment share

MARKET SEGMENTATION BASES FOR SEGMENTATION

NEEDS

PROFILES

MARKET SEGMENTATION MARKET PROFILES DESCRIPTIVE MEASURABLE CUSTOMER CHARACTERISTICS

GEOGRAPHIC region of the country urban or rural area

PSYCHOGRAPHIC social class lifestyle type personality type

DEMOGRAPHIC age, sex, family size income, occupation, education religion, race, nationality

BEHAVIORAL product usage brand loyalty type of user

MARKET SEGMENTATION CRITERIA FOR SEGMENTATION Effective : homogeneous customers but significantly different from the others. Identifiable: business must be able to identify customers in the proposed segment. Profitable: more segments - greater opportunity – added value Accessible: customers can effectively reached and served. Actionable: taking advantage of the segmentation scheme it develops.

MARKET SEGMENTATION FACTORS OF MARKET ATTRACTIVENESS

SEGMENT SIZE

SEGMENT GROWTH

PROFITABI LITY

CAPABILITIES COMPETITION

MARKET SEGMENTATION MANAGEMENT STRATEGIC CHOICES Undifferentiated marketing : Ignoring actual or potential differences among segments. Designs a product and marketing mix that will appeal to the mass market. Differentiated marketing: Develop different products and different marketing programs for each segment of the market. Focused marketing: Specializing in one or small numbers of segments.

MARKET SEGMENTATION-EXAMPLE AIRLINE INDUSTRY CLASS

VARIABLE FIXED PASSENPRICE REVENUE VARIABLE PROFIT COST COST GERS COST

Undifferentiated Strategy No Class

240

250

20

60,000

4,800

50,000

5,200

50,000

37,840

Differentiated Strategy Economy

144

250

20

36,000

2,880

Business

72

500

40

36,000

2,880

First

24

1,000

100

24,000

2,400

96,000

8,160

TOTAL

240

MARKET POSITIONING

Designing the company’s offering and image so that they occupy a meaningful and distinct competitive position in the target customers’ minds.

MARKET POSITIONING POSITIONING OPTIONS Introduce new brand - IBM Change existing brand - Compaq Alter beliefs about the brand - Chivas Alter beliefs about competitive brands – Body Shop Alter attribute importance rates - Volvo. Introduce new or neglected attributes – Unilever – Radion Detergent. Find a new market segment - Dunhill.

MARKET POSITIONING MAJOR POSITIONING ERRORS Underpositioning Buyers have vague idea about the product and don’t really sense anything special about it.Crystal Clear Pepsi (1993)

Overpositioning Too narrow image of the brand. – Customer perception vs. actual.

Confused positioning Confused image – too many claims

Doubtful positioning Too hard to believe what the product claims.

MARKETI NG PLAN

MARKETING PLAN

MARKETING PLAN

IMPLEMENTATION

MARKETING AUDIT EVALUATION

MARKETING DECISIONS

MARKETING PLAN STRATEGIC FUNCTIONS

Give direction to marketing effort Framework for allocation of resources Basis for communication Basis for coordination of efforts Platform for evaluation and control

MARKETING PLAN MAJOR COMPONENTS OF MARKETING PLAN BACKGROUND ANALYSIS Current performance Background analysis Opportunities and options

How well the product is performing now Factors that led to failure & success Where is the business leading to

MARKETING OBJECTIVES Marketing Objectives Financial Objectives

Clear sales goals and target market share Profits, Return on Investments, Cash Flow

MARKETING STRATEGY Target market segment Differential advantage

Types of customers aimed at Analysis of customers needs and profiles Define competitors and their strategies.

MARKETING MIX Product Promotion Price Services Staff

Set of marketing decisions to implement positioning strategy

MARKETING PLAN MAJOR COMPONENTS OF MARKETING PLAN

ACTION PLANS

Details of implementation Who is responsible When it will be done How much it will cost

BUDGET

Projected Revenues Expenditures Profits Cash Flow

ORGANIZATIONAL IMPLEMENTATION

Staff Organizational design

MARKETI NG MANAGEMENT PROCESS The 4 P’s

PRODUCT

PRODUCT

Bundle of Utility (satisfaction) that buyer receives as result of lease/purchase

PRODUCT MANAGERIAL DECISIONS – PRODUCT DEV’T.

PROCEED TO NEXT STAGE

GET ADDITIONAL INFORMATION

ABANDON PRODUCT

PRODUCT STEPS IN PRODUCT DEVELOPMENT

IDEA GENERATION

PRODUCT DEVELOPMENT

SCREENING OF IDEAS

TEST MARKETING

ECONOMIC ANALYSIS

COMMERCIALIZATION

PRODUCT PRODUCT LIFE CYCLE VALUE Sales/Profit Decline Market Acceptance

Maturity

Abandon

Product Launching Growth Competitive

Decline

Introductory

TIME

PRODUCT

REASONS WHY PRODUCT FAI L Inadequate product analysis Product deficiencies Lack of effective marketing effort Ease of competitive entry Poor timing of introduction Technical or production problems

PRODUCT

SOLUTIONS TO AVOID PRODUCT FAILURE Organizational change Better marketing research Improved screening and evaluation of ideas

PRICE

A function of cost Money value of a product/service

PRICE PRICING OBJECTIVES

Profit oriented objectives – rate of return Sales oriented objectives – volume sales Status Quo – satisfied profit under market share

PRICE PRICING STRATEGIES

SKIMMING – setting higher price from what market expects – PRICE FOR QUALITY.

PENETRATION PRICING – setting low initial price at certain profit – MASS MARKET TARGET

PRICE PSYCHOLOGICAL PRICING STRATEGIES

FIXED PRICE – selling at oneprice system (retailers) VARIABLE PRICE – prices at different timings and different events ODD- PRICE POLICY – Prices set at odd amount (ex. 99.95, 89.99)

PRICE STEPS FOR DEVELOPING PRICING STRATEGY Assess Price Competitiveness

Set Pricing Objectives

Strategic Price Focus

Evaluate Competitive Strategies

Target Market segment

Measure Value to customers

Product line pricing

Select Price

PRICE PRICING OBJECTIVES AND STRATEGY HARVEST PRODUCT – MATURE PRICE – HIGH

GROWTH BUILD PRICE AS AGGRESSIVE WEAPON TO BUILD SHARE OR ENTER MARKET

USE CASH –NEW PRODUCTS

MAINTAIN

QUALITY LEADERSHIP

ADJUST PRICES DEFENSIVELY PREVENT COMPETITIVE EROSION

LEADER IN PREMIUM PRICE NICHE Ex. Rolex, Bang & Olufsen Rolls Royce

PLACE ( DI STRI BUTI ON)

PLACE

Selection and management of channels and product flow to consumers

PLACE CHANNEL OPTIONS

DIRECT MARKETING Advertising

SALES FORCE

Own sales force

Telephone

INTERMEDIARY MARKETING Merchants Agents

Another firm Mail

Facilitators

Catalogues

Contract Force

PLACE TYPES OF CHANNEL MARKETING SYSTEMS CONVENTIONAL MARKETING CHANNEL VERTICAL MARKETING SYSTEM HORIZONTAL MARKETING SYSTEM MULTI- CHANNEL MARKETING SYSTEM

CONVENTIONAL MANUFACTURER delivery

ordering

Design Make Brand Price Promote Sell

WHOLESALERS delivery

ordering

RETAILERS

Buy Stock Promote Display Sell Deliver Finance

END CONSUMERS

VERTICAL MANUFACTURER

Marks & Spencer Mercedez Benz Shell

WHOLE SALER

RETAILER

END CONSUMERS

Design Make Brand Price Promote Buy Stock Display Sell Deliver Finance

HORIZONTAL Two or more autonomous organizations at the same level cooperate in exploiting market opportunities

Reduces risks of resources at individual level Speed to penetrate new market Access to new technologies and knowledge Philips & Dupont – Devt of Compact Discs Toyota & Gen Motors – assembly of cars

MULTI CHANNEL Using multiple channels to satisfy differing needs of segments and customers

HP

Sells pc through own sales force Use computer stores Direct Marketing Value Added Resellers

PROMOTI ON MARKETI NG COMMUNI CATI ON MI X

MARKETING COMMUNICATION MIX ADVERTISING Any paid form of non- personal presentation and promotion of ideas, goods, or services by an identified sponsor. PERSONAL SELLING Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships.

MARKETING COMMUNICATION MIX SALES PROMOTION Short- term incentives to encourage the purchase or sale of a product or service.

PUBLIC RELATIONS Building good relationships with the public by publicity for a "corporate image.

MARKETING COMMUNICATION MIX

DIRECT MARKETING Direct communications with carefully targeted individual consumers to obtain an immediate response and cultivate lasting customer relationships.

SETTI NG THE PROMOTI ON MI X

SETTING THE PROMOTION MIX VALUE Advertising Public Relations Branding Personal Selling

Advertising Decreases Sales Promotion Personal Selling Reminder/Presuasion

Sales/Profit Decline Market Acceptance Product Launching

Growth Competitive

Introductory Pre-Introduction Light Advertising Pre Introduction Publicity Introduction Heavy Advertising Public Relations Sales Promotions

Advertising Decrease Public Relation Decrease Sales Promotion-Limited Personal Selling

Abandon Maturity Decline

TIME

ADVERTISING GOALS

ADVERTISING

ADVERTISING OBTAIN AROUSE HOLD GET

STAGES IN ADVERTISING CYCLE INTRODUCTORY ADVERTISING Develop consumer awareness COMPETITIVE ADVERTISING Emphasis such as “Better” “Improved” “ No 1” RETENTIVE ADVERTISING Develop consumer loyalty by repetitive advertising

Marketing Effectiveness

ORGANIZATION

Measure of quality of relations

EFFICIENCY “Doing things right”

ENVIRONMENT

EFFECTIVENESS “Doing the right things”

OVERCOMING CHALLENGES

THE COMMUNI CATI ON OPTI MI ZATI ON PROCESS David Lowndes

OPTIMIZATION PROCESS ANALYSIS Evaluate current communication materials in relation to the following Critical Success Factors (CSF) Specific objectives & desired response- campaign materials. Target markets Industry norms, best practices, business environment Value of transaction or sales Customization and personalization needs Audience demographics Competitive program offerings Business and marketing objectives Product lifecycles Inventory quantities, shelf life and value Usage and reorder patterns Design requirements and constraints Corporate graphic standards Production options and costs Delivery options and costs Privacy and other regulatory compliance

OPTIMIZATION PROCESS RE-ENGINEERING

REVISE RE-DESIGN COMBINE ELIMINATE ADD GOAL : Align copy graphics and production processes to maximize response rates, manage costs.

OPTIMIZATION PROCESS AUTOMATION

Automate production Integrate technology into designs and strategies to gain competitive advantage.

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