[MUSIC]Hello, I'm Barbara Kahn, and I'm aprofessor of marketing at the WhartonSchool.And, I'm here to talk to you aboutmarketing.So this, this segment is Marketing 101,the basics, the principles of marketing.And my focus is going to be on buildingstrong brands because ofcourse the essence of marketing is to havea very strong brand.So, let's start off with the firstquestion, a very basic question but maybenotas obvious as you might think.Which is what is marketing?And I'm going to argue that marketing isthe studies of a market.So what's a market?A market is an exchange between twopartners, frequently a buyer and a seller,but marketing also, applies to non-profitorthings where there isn't necessarily moneybeing transacted.But what you need for marketing to existor for a market toexist is to have an exchange.And what I'm going to argue is that whatmarketing means isgoing to differ as a function of differentaspects of those exchange.So let's let's look at the basic exchange.You have one buyer and one seller.And I'm going to give a very simplifiedview tomake a point no markets were ever quitethissimple and I'm going to look at the twoextremesjust to get get a a make my point here.and the real marketsare somewhere in the middle.But you'll see when I start defining this,thatit's very useful to use this, this kind ofsimplification.So if we think of an exchange betweenbuyers and sellers.On one extreme we could have what's calleda seller's market.And in the seller's market what that meansis the seller has aproduct, and if you want that product, youhave to come to the seller.So the seller has all the power.The opposite of that wouldbe a buyer's market where there's lots ofcompetition, alot of products out there, and the buyerhas the power.And what I would argue, and I think wouldmake sense to you too if you thinkabout it, is marketing should not be thesamein the seller's market as in the buyer'smarket.So, in the seller's market, what marketingtendsto be is what we call product focusmarket.You have the product.If the customers want it, they're going tocome to you.In that case, you should develop thatproduct to the best of your ability.You should innovate in that product, youshould try toreduce cost and you should really focus onthe product.Your business objective in aproduct-focusedmarket is to sell as much asyou can, and profitability from aproduct-focusedmarket is going to come from volume.Selling as much as you can.In the past when we've studied productfocus market,we've shown that profitability is tied tomarket share.So market share becomes your businessobjective.And why does market share increaseprofitability?Because the bigger your market share, themore your revenues.And the bigger your market share, and yourvolume, the lower the product cost andhint profitability.Higher revenues, lower cost, more profit.That's really the goalof a product focused market and whenyou're product focused, where do you getgrowth?Will you develop new products based onyourproduct experience or you go to newmarkets?That's product focused marketing.So what's customer focused marketing?Is it the opposite?And the, and the answer's going to be no,not exactly.In fact, it's quite a different type ofmarketing.Let's think about it.Customer focused marketing means that Ineedto focus on the customer to get thatcustomer to buy from me rather than thecompetition.Well, what's the best way to get thecustomerto buy from you rather than from thecompetition?The best way to do it is to look at whatthatcustomer wants, and deliver a product thatmeets the needs of that customer.So where is in product-focused market, I'mthe expert, and Icreate the very best product I can basedon my expertise.In a customer-based market, what I'm goingto do is look at whatthe customer wants, and try to createproduct to meet that customer's need.That's a very different point of view.Some people call it inside-out, thisproduct focus, and outside-in is customerfocus.Okay, so now we're going to look at whatthe customer wants to deliver value tothat customer.But, think about it.What does the customer want?Well, the first question is whichcustomer?You can't give every customer what theywant, and we knowcustomers are going to want all differentthings, so the reason whya buyer's market or customer focusedmarketing is so different thanproduct focus, is that every customer outthere, wants something different.If we try to give everybody what theywant, we'll go out of business.That's too hard to do.So the intuition of customer focusmarketing, is to pick and choosecustomers.Deliver value to some customers.Say yes to some customers and no to othercustomers.That's the process of segmentation andthey call that,I'm going to talk about that in the nextsection.But the idea here is that I go after somecustomers and I say no to other customers.Well, then, how do I become profitable inthat?Understand that in a product focusedmarketing, whatwe did is sell as much as we can.We sold that product to anybody who wantedthat product.In the customer focused market, we'resayingno to some customers and yes to others.So, how do we make that profitable?And, the answer is you pick and choose thecustomers you want to deliver.You deliver value to that customer, givethem exactlywhat they want and that they're willing topay for,and where the profitability comes from isnot from volume, but it's from creatingvalue.How can, how can value-based marketing beprofitable?Well, first thing is if I give you exactlywhat youwant, many times, you'd be willing to paya premium price.Then the profitability comes in not fromreduced cost, which wesaw in the seller's market side, but fromincreased price premium.If you give me exactly what I want, I'llbe willing to pay a higher price for it.So that's one way.The other way, customer based marketing isprofitable is bygiving the customer what they want timeafter time after time.I don't think about just one transaction,I think about building customer loyalty.And, delivering value to that customerover time.That concept is called customer share.Rather than market share, while I try toget a littlebit from everybody, the idea of customershare, or share ofwallet is that I go after a more narrowmarket andtry to get more from each of that, their,those customer's wallets.And it turns out that loyalty is very,can,if you do it right can be very profitable.And why is loyalty more profitable?Because it's the costof delivering value to the customer.When I'm doing a customer based marketingit's actuallyquite expensive to give the customerexactly what they want.Once I figure out what that customer wantsand I deliver it to themthe first time, it's cheaper to deliver itto them time after time after time.So it's more difficult and more expensiveto acquire new customers, butits cheaper to retain those customers overtime, and that's where the profitabilitycomes from.It comes from loyalty.The other thing, if you're thinking aboutbuilding share of wallet inthe customer-focused market, is that I notonly sell one product to you.I think about other things that you mightneed and I try to cross sell around it.Let me give you an example of this notionof cross selling.If you've ever gone into a GAP or somejeans store, and, andyou go to the cash register and you buy apair of jeans.The, the cashier or that person behind thecounter might say: Oh these are very nicejeans.Do you think you'll need a belt with that?Do you think you'll need socks?That's the notion of cross selling.So I'm selling other things to you besidesthat one specific product.All of these are the idea of increasingcustomer shareand that's a very important part ofcustomer focused marketing.Give the customer exactly what they want.They'll be willing to pay a premium pricefor it.Give them what they want, and keepdelivering value over time,they will stay loyal to you, and they'llbuy over time.And that's more profitability.And if you understand their needs, you cannot only deprut, sell them oneproduct, but you can cross-sell otherproductsthat may also nee, meet their needs.So in a customer-based market, whereprofitability comefrom is premium price, loyalty, and crossselling.Difference between sellers market says youfocus on the product, on what the customerdoes well, and you push that out.And in a customer based market, you focuson the customer, what the customer wants.And you deliver value to the customerbetter than the competition.So that's the basic difference betweenproduct based marketing and customer focusmarket.Now in today's world the market place haschanged even more.What's changed?Well now not only do you have an exchangebetween buyers and sellers, but because ofglobalization and becauseof the Internet and technology and socialmedia and thingslike that, it's not a one to oneconversation anymore.Customers can talk to other customers.That's good and bad.If you're doing a really good job andmeeting the, needs of the customers,the fact that they'll buzz to their othercustomers and tell their, their otherfriends about what a terrific service yourcompany is doing.Well, that's really good news.On the other hand, if something goeswrong, and theytell their friends something bad, wellthat's not such good news.And so you have to be really careful, inevery transaction with the customer now,that you deliver not only value, butthat you deliver a top notch customerexperience.Because althoughwhat I've been talking about in theseller's marketand in a buyer's market has focused ontransactions.In the seller's market I've talked about asingle transaction.In a buyer's market, I talkedabout transactions over time or customerloyalty.But in a connected community, if yourmessage is being transmittedby customers to other customers, they talkabout the customer experience.What do I mean by customer experience?Lemme give you an example.It starts way before the transaction, andit goes way after the transaction.So for example, if a customer toldanother customer that their experience ata restaurant.They might say, well I was driving to thatrestaurant and I hit a lotof traffic, then I got to the parking lotand I couldn't find a parkingspace, finally when I got into therestaurant, I finally got a table, themealwas really good but then at the end of themeal when I was leavingI tripped and fell.That may be the way they describe theexperience at the restaurant.And if that's the way your message aboutyour product is going to be transmittedfromcustomer to customer then you as amarketerneed to focus on the entire customerexperience.So, one of the things, and we'll talkabout this later that's changed inmarketing inthis world of social media and internetandglobalization, is that the marketer has tobecompletely transparent, has to beauthentic, andhas to focus on the entire customerexperience.One thing else to mention, we're seeminglycoming outof a recession now, but there was a globalrecession, and in the last few years,probably startingabout 2008, we had some real strongeconomic uncertainty.There was a lot of scandals going on.People became skepticalof marketing.Marketing had some bad names, thefinancial services industry.People lost trust.And so with all those changes in theeconomic environment, there's been a focusagain, in marketing.And marketing now has to focus onauthentic, genuine customer value.In order to be profitable, you not onlyhave todeliver customer value over time and in anexperiential way,but now because of the tightness of theeconomy andthe uncertainty there, you really have tocut costs and figureout a way to deliver value in a verydisciplinemanner and be very flexible to changes inthe market place.So let me just summarize what I've justsaid.The different types of marketingorientations.There's the product orientation where youfocus on the product and you persuadethe customer to want what the firm has.There's the marketing orientation.Where you persu, persuade the firm tooffer what the customer wants.That's a customer focus approach.The experience orientation says that younot only thinkabout the transaction, and think about thetransactions over time.But you try to manage the customer'sentire experience with the firm.And when times get tough orcustomers stop trusting markets, then youneed to remember tobuild that relationship based onauthenticity, on trust, and on discipline.And what's the difference in thesedifferent typesof marks in terms of what you offer?In the production orientation, you'refocusingon product innovation, but also reducingcosts.So you tend to see generic products andstandardization.When you're focusing on customer value,you see differentiated products,and we'll talk about that, when we talkabout brands also.How you position your product to meet theneeds of the customers better.In an experience orientation you look atexperiential value.And when you're going to that tightdisciplinemindframe or mindset you look at genuinevalue.And what's the competitive sustainablecompetitive advantage ineach of these markets?In a product orientation the biggercompanies win because they tend to havelarger market share and lower cost, andlower cost is a big strategic advantage.In a marketing orientation, when you'refocusing on the customers,the, the companies that do the best arecustomers, arecompanies that really know theircustomers, that can deliver quality,and that have a lot of customer data andknowhow to use that data to deliver bettervalue.In an experiential market, you look attransformation.The customer becomes a co-creator of thevalue, and it's reallymaking the customer and the product onekind of overall experience.And in a trust orientation, thesustainablecompetitive advantage are the companiesthat you trust.And that means you've had a long historywith them.They're transparent, andyou trust them over time.And what are the measurements ofprofitability?In production orientation as I mentioned,market share is tied to profitability.In marketing orientation, it's share ofwallet or customer share, customerloyalty.In experienced market, when you're lookingat customers talking to other customers,we start measuring social networks andbuzz and word of mouth and referrals.And in a trust orientation, we reallyfocus on reduced costs.So in summary for just this littlesection, let mesay that there's three principles ofmarketing that I've discussed.and this is the essence of what marketingis.The first principle is, if you want toprovide something to a customer,to buyer, and get them to buy from you,rather than the competition,you've got to give them real, genuineCustomer Value.That's the Principle of Customer Value.The second principle is the Principle ofDifferentiation.You have to provide customer value to thatcustomer what thecustomer wants but you have to do itbetter than the competition.So you have to differentiate youroffering.And the third principle is the principleof segmentationtargeting and positioning says when you'rein a customerfocus market you cannot deliver value toeverybodyand make money it's just too difficult todo.So what you do is segment the market intodifferent segments.You target or choose a segment you want tofocus on, andyou position your brand to meet the needsof that target segment.And what are the tools that you use todeliver these three marketing principles?They're the four P's of Marketing.The four P's of Marketing are product,place, promotion, and price.Lets go back to that exchange, and thatexchange says your a buyer and a seller.What the seller puts into the exchange isthe product.What the buyer puts into the exchange isthe price.The way the seller communicates thebenefits aboutthat product to the buyer, is called thePromotion.Could be advertising sales, whatever.And the way the seller delivers theproduct to the customer is the PlaceDecision.It can be in a physical store, it can beonline, it can be through downloading.Whatever the method of distribution isthat's the Place Decision.So those are the four P's of Marketing.Product, place, promotion and price.Typically, when you talk about marketing,you talk about thebusiness world, but you can use theseprinciples of marketing in non-profitmarketing as well.Think about blood donation.The American Red Cross used marketingprinciples to get increases in blooddonations.Now let's think about what is the productforthe American Red Cross when they want moreblood?It's not blood, is it?Because that's not what they're puttinginto the exchange.Blood, is actually the price.It's what the customer puts into theexchange.So what is the product?What the American Red Cross did was try tofigure outways to get people to be more willing todonate more blood.So in one way they did, you know, feelgood about yourself.You're going to help save lives.That worked for some people.For some people, that wasn't enough.They needed a little sticker that said,yes, I gave blood today and I saved lives.For other people, the orange juice and thecookies were enough.And it turned out that some of the bestblood donation successes they had were inhigh school.You could give b, bla, blood donation if,I think if you were over 16.And it turned out what, one of theproducts that the American Red Cross couldgive to high school kids to give blood,was to allow them to miss class.So, that was the product there.The promotion again is the way theycommunicate the benefits of givingblood to the American Red Cross.And the place decision was how they gotthe product delivered to the, and theexchange made.And in this case the American Red Crosshad the Blood Mobile.And, and went to the customers so that wasa very innovative distribution decision.So you can play around with these four P'sin very interesting ways and some ofthe new businesses that we see now aredoing some very clever things with thesefour P's.But the basic concept should be clear,product, place, promotion and price.[MUSIC]