KENT 29 BAD 67051 Marketing Management

KENT 29KENT 29

BAD 67051BAD 67051Marketing ManagementMarketing Management

Lecture 1Marketing Management Thinking,

Decision Making,& Positioning

Text DefinitionText Definition

Marketing is a social process involving the activities necessary to enable individuals and organizations to obtain what they need and want through exchanges with others and to develop ongoing exchange relationships.

AMA Definition (2004)AMA Definition (2004) Marketing is an organizational

function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

AMA Definition (2007)AMA Definition (2007)

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.

……oror

Marketing is the anticipation, management, and satisfaction of demand through the exchange process.

Marketing ManagementMarketing Management

A. Text Definition“…the process of planning and executing

the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives.” (p.14) [ugh]

Marketing ManagementMarketing Management

B. Philip Kotler and Kevin Lane Keller (2006) define marketing management as "the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering, and communicating superior customer value."

Marketing ManagementMarketing Management

C. Peter Drucker (a management guru) wrote: "Because the purpose of business is to create a customer, the business enterprise has two--and only these two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business .”

Marketing ManagementMarketing Management

D. Marketing Management is the management of “innovative and imitative processes” to identify and satisfy consumers more cost effectively than their competitors.

II. Marketing Management II. Marketing Management PhilosophiesPhilosophies

A. Production Concept

A. Production ConceptA. Production Concept

Assumes consumers want products that are available and highly affordable.

Implies management should focus on improving production and distribution efficiency.

Useful when:–demand exceeds supply–product cost is too high

B. Product ConceptB. Product Concept

Assumes consumers want product that offer the most quality, performance, and features.

Implies the firm should make continuous product improvements.

Places the focus on the product, not the customer.

C. Selling ConceptC. Selling Concept

Assumes consumers will not buy enough product unless there is a strong sales and promotional effort.

Useful for:–unsought goods–nonprofit areas

D. The Marketing ConceptD. The Marketing Concept

Assumes that achieving the organization’s goals depends on determining and satisfying consumers more effectively and efficiently than competitors.– Mullins, Walker, and Boyd say:

“Market-oriented firms…[are]…among the most profitable and successful at maintaining strong competitive positions in their industries over time” (p. 34).

D. The Marketing ConceptD. The Marketing Concept

Three parts to the concept:

–The satisfaction of consumers’ needs, wants, and desires,

–at a profit (or to attain organizational goals),

–through an integrated effort within the firm.

Notes:Notes:Firms must identify and satisfy customers’

needs AND continue to do so!Competition FORCES sellers to focus on

the consumer.Consumers must be seen in the context of

all environmental/market factors (managers must have a “market orientation”).

E. The Societal Marketing E. The Societal Marketing ConceptConcept

Assumes that customer satisfaction should be delivered in a way that maintains or improves the consumer’s and society’s well-being.

(a customer’s wants/needs may be at odds with what is good for society

e.g., pollution control)

III. The Marketing Concept III. The Marketing Concept and:and:

A. Synergy–Managers must create

marketing tactics that fit together well.

–They must coordinate implementation.

III. The Marketing Concept III. The Marketing Concept and:and:

B. Hypercompetition–Competitive Advantages do not last.

Customer Satisfaction and competition require innovation, cost advantages, and quality enhancements.

–Changes create new market segments, with new needs.

C. Relationships– Long term alliances with external

entities (customers, channel members, and suppliers)

– Cross Functional Decision Making Teams within the organization

III. The Marketing Concept III. The Marketing Concept and:and:

Market OpportunitiesMarket Opportunities

Customer Orientation

CompetitorOrientation

CompanyOrientation

PROFITS

EnvironmentalContext

IV. Strategic PlanningIV. Strategic Planning

The process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing markets.

Developed by senior managers– Future oriented– Intended to create objectives and

strategies for success against competition.

IV. Strategic PlanningIV. Strategic Planning

A. Defining the Company’s MissionB. Setting Company Objectives and

GoalsC. Source of Competitive AdvantageD. Development Strategy for GrowthE. Allocation of ResourcesF. Search for Synergy

V. Types of Corporate V. Types of Corporate GROWTH StrategiesGROWTH Strategies

Products Markets

Current Products

New Products

Current Customers

Market Penetration

Product Development

New Customers

Market Development/ Expansion

Diversification

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets

Increase sales of EXISTING products to CURRENT markets =

– 1. Market Penetration

Market PenetrationMarket Penetration

Increase sales of EXISTING products to CURRENT markets.

–Increase Market Share–Increase Usage

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets

Develop NEW PRODUCTS for CURRENT markets =

–2. Product Development

Product DevelopmentProduct DevelopmentDevelop NEW PRODUCTS for CURRENT

markets to:– Meet changing CUSTOMER needs and

wants,– Match new COMPETITIVE offerings,– Take advantage of NEW

TECHNOLOGY, and– Meet the needs of SPECIFIC market

segments.

V. Types of Corporate V. Types of Corporate StrategiesStrategies

B. Growth Strategies for New Markets

Bring CURRENT products to NEW markets =

1. Market Development/Expansion

Market DevelopmentMarket Development

Bring CURRENT products to NEW markets

(e.g., Arm & Hammer)

Market ExpansionMarket Expansion

Taking CURRENT products to NEW DOMESTIC geographic areas

International Expansion–Regional strategy–Multinational strategy–Global strategy

V. Types of Corporate V. Types of Corporate StrategiesStrategies

B. Growth Strategies for New Markets

Taking NEW PRODUCTS to NEW MARKETS =

2. Diversification

DiversificationDiversification

Taking NEW PRODUCTS to NEW MARKETS

(e.g., Arm and Hammer Toothpaste)

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets

– 1. Market Penetration– 2. Product Development

B. Growth Strategies for New Markets– 1. Market Development/Market

Expansion– 2. Diversification

–3. Strategic Alliances

Strategic AlliancesStrategic Alliances

Total collaboration by EXCHANGING key resources to enhance companies’ performance.

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current MarketsB. Growth Strategies for New Markets

C. Consolidation Strategies–1. Retrenchment

RetrenchmentRetrenchment

WITHDRAW from WEAKER current markets

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current Markets

B. Growth Strategies for New MarketsC. Consolidation Strategies

– 1. Retrenchment

–2. Pruning

PRUNINGPRUNING

REDUCE the number of PRODUCTS offered in current markets

V. Types of Corporate V. Types of Corporate StrategiesStrategies

A. Growth Strategies for Current MarketsB. Growth Strategies for New MarketsC. Consolidation Strategies

– 1. Retrenchment– 2. Pruning

–3. Divestment

DivestmentDivestment

Selling off part of the business -- ELIMINATE a product and a current market.

V. Types of Corporate StrategiesV. Types of Corporate Strategies

A. Growth Strategies for Current Markets

B. Growth Strategies for New Markets

C. Consolidation Strategies

D. Other Corporate Strategies

Other StrategiesOther Strategies

1. Based on Competitive AdvantageLow Cost Leader orDifferentiation--Offer a unique value to customers based on:

Design, quality, service, variety, etc.

Other StrategiesOther Strategies2. Based on Value Disciplines

Operational Excellence--“Okay” products, best price, least inconvenience

Product Leadership

--Innovation for best product performance

Customer Intimacy

VI. Product Portfolio Models VI. Product Portfolio Models

A. The Boston Consulting Group Growth-Share Matrix

The BCG ModelThe BCG Model

STAR

CASH COW

PROBLEMCHILD

DOG

Market-Growth

Rate

High

10%

Low

0%

Market Dominance/Relative Market Share10X High Low 0.1X

The BCG Model -- Cash CowsThe BCG Model -- Cash CowsDominant in Low Growth Market

– Low Growth Sales– Strong Profits– Generate a Large Cash Flow– Do NOT require Cash Resources to be

Reinvested– PROFITS flow to APPROPRIATE

Problem Children

The BCG Model -- Problem The BCG Model -- Problem ChildrenChildren

Low Market Share in High Growth Market– High Growth Sales– Weak Profits– Typically, require additional Cash to

become a Dominant Star

The BCG Model -- StarThe BCG Model -- Star

Dominant in High Growth Market– High Growth Sales– Profitable, but requires attention– Requires Cash and Resources to stay

Dominant– Will be a Cash Cow in the Future

The BCG Model – DogsThe BCG Model – Dogs

Low Market Share in Low Growth Market– Low Growth Sales– Weak Profits– Typically, generate a Little Cash

Flow (or have a weak future)– Not a good candidate for Cash

Resources to be Reinvested

B. The Directional Policy MatrixB. The Directional Policy MatrixCompetitive Position

MarketAttractiveness

High

Medium

Low

MediumStrong Weak

MaintainLeadership

ChallengeLeader

Cash Generator

ChallengeLeader

Manage forEarnings

Harvest

Harvest

Divest

Overcome,Niche, orQuit

VII. Marketing Management & the VII. Marketing Management & the Marketing PlanMarketing Plan

A. The Marketing Plan

With an understanding of the organization’s mission and objectives…

A Marketing Plan is written to document the current situation with respect to customers, competitors, and the external environment and providing guidelines for objectives, marketing actions, and resource allocations(text page 20)

VII. Marketing Management & the VII. Marketing Management & the Marketing PlanMarketing Plan

1. Situation and Trend Analysis

Marketing Planning begins with a situation and trend analysis….with an eye toward opportunities and threats:• Current and potential customers• Competition• Environmental trends• Other key assumptions

VII. Marketing Management & the Marketing VII. Marketing Management & the Marketing PlanPlan

CUSTOMER

VII. Marketing Management & the VII. Marketing Management & the Marketing PlanMarketing Plan

2. Establish Objectives

• Goals in terms of sales volume, market share, and/or profits

3. Select and describe the overall strategy to be used

4. Detail the “Marketing Mix”• Timing• Responsibility

VII. Marketing Management & the VII. Marketing Management & the Marketing PlanMarketing Plan

5. Financials

• Costs and payoffs

6. Controls

7. Contingency Plans

THE MARKETING MIXTHE MARKETING MIX

Product

(Good, Service, Idea)

Price

(Value)

Promotion

(Integrated Marketing Communications)

Place

(Distribution)

Customer

(Target Market)

THE MARKETING MIXTHE MARKETING MIX

All this is easier said than done!!

We cannot “set” the marketing mix without “truly” understanding the environment, the customer, and our firm’s capabilities.

VIII. Understanding Market OpportunitiesVIII. Understanding Market Opportunities

CUSTOMER

VIII. Understanding Market OpportunitiesVIII. Understanding Market Opportunities

VIII. Understanding Market OpportunitiesVIII. Understanding Market Opportunities

A. Macro Trend Analysis

1. Demographic Environment

2. Socio-cultural Environment

3. Economic Environment

4. Regulatory Environment

5. Technological Environment

6. Natural Environment

VIII. Understanding Market OpportunitiesVIII. Understanding Market Opportunities

CUSTOMER

VIII. Understanding Market OpportunitiesVIII. Understanding Market Opportunities

B. Assessing Industry Attractiveness –

Porter’s Five Competitive Forces Model

Threat of New Entrants

Bargaining Power of Suppliers

Threat of Substitute Products

Bargaining Power of Buyers

Rivalry Among Existing

Competitors

VIII. Understanding Market OpportunitiesVIII. Understanding Market Opportunities

C. Micro Analysis – Assessing Market Attractiveness

1. Is there is a Customer Need we can fulfill?

2. Is our solution special/unique?

3. Is the market likely to grow?

4. Is this a platform for expansion?

IX. Measuring Market IX. Measuring Market Opportunities: Forecasting Opportunities: Forecasting

and Market Knowledgeand Market Knowledge

Research and Intelligence provide information necessary to clarify the “unknown.”

A. ForecastingA. Forecasting

1. Market and Sales Forecasting is absolutely critical

• Forecasts drive budgets!

2. Forecasting is HARD• “Every Forecast is wrong!”

3. WHY BOTHER?

B. Forecasting TermsB. Forecasting Terms

1. Total Population– e.g., 281.4 million people living in 105.5

million households.

2. Market Potential– Those who have an interest in the

product/service and ability to buy– Not all have the money or the legal

status to buy

B. Forecasting TermsB. Forecasting Terms

3. Target Market– Those the firm wants to serve– e.g., 77.4 million households in the Nestles

example

4. Penetrated Market– Those who have actually purchased the

product

US Households by Type: 2000

Household type Number Percent

Total households 105,480,101 100.0 Family households 71,787,347 68.1 Married-couple households

54,493,232 51.7

Female householder, no husband present

12,900,103 12.2

Male householder, no wife present

4,394,012 4.2

Nonfamily households

33,692,754 31.9

One person 27,230,075 25.8 Two or more people 6,462,679 6.1

Source: U.S. Census Bureau, Census 2000 Summary File 1.

C. Types of ForecastsC. Types of Forecasts

1. Top-downa. “Central” management determines the

forecast

2. Bottom-Up

a. “Decentralized” approach; individual forecasts are “summed” to the total.

D. Sources of ForecastsD. Sources of Forecasts

1. Statistical Methods2. Observation

3. Survey or Focus Groups

4. Analogy

5. Judgment

6. Market Tests

E. Sources of Market KnowledgeE. Sources of Market Knowledge

A. Secondary Data

Data previously collected by someone else for a purpose other than the one at hand

Sources of Market KnowledgeSources of Market Knowledge

1. Advantages of Secondary Data:– Almost always less expensive than

primary data– Can be obtained rapidly– Can provide understanding of the

existing knowledge base and gaps

2. Disadvantages of Secondary Data:– Since it is previously collected data,

may be out-dated– May be collected only periodically– May not have been collected in the

form preferred– May not be able to assess its accuracy

3. Examples of Secondary Data:– Census Bureau data and other

Government reports– Sales & Marketing Management

Survey of Buying Power and other Industry newsletters

– Computer Databases– The Internet

3. Examples of Secondary Data:

- Competitor Reports

- Scanner Data

Sources of Market KnowledgeSources of Market Knowledge

B. Primary Data

Data gathered and analyzed specifically for the purpose at hand

Sources of Market KnowledgeSources of Market KnowledgeC. Types of Primary Data1. Surveys:Information is gathered from a sample of

people by means of a questionnaire

–Customer Surveys: Values, Benefits, Beliefs, and Satisfaction

–Focus Groups

Sources of Market Knowledge

C. Types of Primary Data

2. Observation:Systematic recording of behavior or

events as they are witnessed

– Customer Visits

– Vendor Visits

– Competitive Product Usage

C. Types of Primary Data

3. Experiments:Cause and effect relationships by

changing variables to observe response of another variable

– Test markets for changes in price, product, distribution, and promotion

Sources of Market Knowledge

Sources of Market KnowledgeSources of Market KnowledgeC. Types of Primary Data4. Other

–Trade Shows–Reverse Engineering

5. Research Firms:Marketing Research Companies athttp://www.harcourtcollege.com/marketing/

students/research_comp.htm

IX. Decision Support SystemsIX. Decision Support Systems

A. Decision Support System Defined:…a coordinated collection of data, system

tools, and techniques with supporting software and hardware by which an organization gathers and interprets relevant information from business and the environment and turns it into a basis for making management decisions.

MarketingIntelligence

Internal recordsand reports

MarketingResearch

Database

Data Collection System Decision Support System

Analytic Models

InteractionSystem

IX. Decision Support Systems

IX. Decision Support SystemsIX. Decision Support SystemsB. Database: a collection of information that is

arranged in a logical manner and organized in a form that can be stored and processed by a computer

C. Analytical models system: the database management software that is

used to analyze or provide access to the data within the system

IX. Decision Support Systems

D. User interaction system:• the software that manages the interface

between the user and the system

X. Hypercompetitive Market X. Hypercompetitive Market ResearchResearch

Cross functional teams continuously stay in close touch with lead consumers and suppliers

XI. Global Market ResearchXI. Global Market ResearchA. Global Information System = an organized

collection of:– telecommunications equipment, – computer hardware and software, – data, and– personnel

designed to:– capture, store, update, manipulate, analyze, and

immediately display information about worldwide business activities

XI. Global Market ResearchXI. Global Market Research

B. Global Market Research– 1. Who Does the Research?– Local Group?– Company Team Nearby?– Secondary vs. Primary– 2. The Visit by Executives– Trade Mission– Trade Fair