Marketing 101 – The Engineer’s Role in Marketing Michael Richarme, Ph.D. Senior Vice President,...
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Marketing 101 – The Engineer’s Role in Marketing Michael Richarme, Ph.D. Senior Vice President, Decision Analyst, Inc. and Adjunct Professor of Marketing, The University of Texas At Arlington April 12, 2010
Marketing 101 – The Engineer’s Role in Marketing Michael Richarme, Ph.D. Senior Vice President, Decision Analyst, Inc. and Adjunct Professor of Marketing,
Marketing 101 The Engineers Role in Marketing Michael Richarme,
Ph.D. Senior Vice President, Decision Analyst, Inc. and Adjunct
Professor of Marketing, The University of Texas At Arlington April
12, 2010 Dallas, Texas
Slide 3
Session Objectives A brief and eclectic trip through the mind
of the customer An overview of some modern marketing tools and
practices Tips for being effective as an engineer in dealing with
those marketing people
Slide 4
Session Roadmap Begin at the beginning and go on till you come
to the end: then stop The King in Through the Looking Glass by
Lewis Carroll
Slide 5
So, What is Marketing, Anyway? Think of a single cell organism
your business In the nucleus, there are all the major corporate
functions finance, accounting, manufacturing, engineering, and so
forth Outside the cell, there are all those customers floating
around Marketing is the membrane enclosing the cell, interfacing
with the customer and all the corporate functions and establishing
a two-way transaction between the customer and the business
Typically included in marketing functions are Product development
and management, Advertising and promotion, Pricing, Distribution
and sales, and Brand management these may fall in different
departments in the business or under different names
Slide 6
Lets Start With the Customer Marketing tries to listen very
carefully to customer needs and wants Generally customers cant
express these needs and wants very clearly Marketing acts as an
interpreter and translator for the rest of the business Marketing
can only impact what a customer wants, not what a customer
needs
Slide 7
What a Customer Needs (Maslows Hierarchy of Needs) Self-
actualization Social Needs Ego Needs Physiological Needs (food,
water) Safety and Security Needs Source: Maslow, A., Motivation and
Personality (New York: Grossman Publishers, 1970) Survival needs
Belonging needs Independence needs
Slide 8
The Mind of the Customer What distinguishes humans from
animals? Opposable thumb Cerebral cortex Some major Limbic
Structures of the Brain Medial Pre-frontal Cortex higher thinking
and reasoning functions Hippocampus center of memory Amygdala basic
instinctive functions and center of emotion, mood, attitudes, and
beliefs Cognition Logical, precise, evaluative, systematic, recent
evolution Occurs in the front of the brain Affect Unconscious,
instinctive, highly heuristic, cave-man legacy Occurs in the rear
of the brain
Slide 9
Memory and Decision-Making The brain receives continuous
stimuli The brain processes these stimuli and creates memory Two
types of memory Short term, verbatim (photographic recall) Long
term, gist (reconstructed from cues) Even verbatim memories contain
emotional tags When faced with a decision, people access memories
for past experiences, framing, biases, and risk assessment
Slide 10
Memory and Decision-Making The brain utilizes two simultaneous
decision processes Cognitive deliberate, reasoned, unemotional
Affective impulse, heuristic, highly emotional These two decisions
race, and often conflict For simple decisions, affect often wins
Even with complex decisions, there is an affective element Up to
95% of our decisions are affectively driven Made in the
subconscious This means we dont know and often cant tell why we
made the decisions we made Source: Scarabis, Florack, Gosejohann
(2006), When Consumers Follow Their Feelings: The Impact of
Affective Or Cognitive Focus on the Basis of Consumers Choice,
Psychology & Marketing, 23:12, 1015-1034
Slide 11
Customer Decision-Making Process Origination Information
Gathering Evaluation Purchase Decision Postpurchase Evaluation and
Behavior Pre- purchase Purchase Post- purchase What prompts the
customer to action? What factors influence the customers decision?
What attributes of the product does the customer consider? What
options does the customer identify? What decision(s) does he make?
What does the customer do about his decision? Because value
creation is based on understanding and meeting customer needs.
Source: Alba, Hutchinson, and Lynch (1990), Memory and Decision
Making, Handbook of Consumer Theory and Research, Englewood Cliffs,
NJ: Prentice-Hall, 1-49.
Slide 12
A Peek Inside the Marketers Toolbox (not suitable for viewing
by small children) 1.Strategy decide who you want to be
2.Positioning decide how you are going to get there 3.Research
listening to the customer 4.Product innovation and development
moving from ideas to products 5.Pricing and Profitability how much
is that doggie in the window? 6.Brand equity, loyalty, and
satisfaction retaining your customers and keeping them happy
7.Relationships versus transactions new school versus old school
8.Impact of the Internet incorporating this medium into brick and
mortar businesses 9.Growth and expansion new markets versus new
products 10.International issues do we really want to go
there?
Positioning What are the important dimensions of the product
from the customers point of view How does your product map on that
grid How do your major competitors map on that grid Where should
your organization concentrate resources to have the biggest impact
#2
Slide 15
Bases of Positioning Product attributes less calories with the
same taste Price and quality lower price for more value Use or
application suppresses appetite all day Product user type for the
outdoor enthusiast Product class this class of product is different
from normal ones Competitor products drink this product instead of
coffee Emotional profile taps into emotional attributes of a
product Source: Hair, McDaniel (2009), Essentials of Marketing 6 th
Ed., (Mason, OH: South-Western Cengage, 2009)
Slide 16
Using Perceptual Mapping for Positioning Analysis Practical,
affordable Classy, Distinctive ConservativeSporty Ford Dodge Buick
Chrysler Cadillac Mercedes Lincoln Porsche BMW Pontiac Chevy Nissan
Toyota VW
Keys to Effective Segmentation Meaningful Actionable
Substantial Measurable Customers must demonstrate needs,
aspirations or behavioral patterns that are similar within a
segment and different across segments A distinction between a
price-sensitive and a quality-seeking segment is meaningful, since
the two segments demonstrate distinguishable sets of needs A
company must be able to reach customers within each segment through
effective and targeted marketing programs A customer segment
consisting of customers with blue eyes is not actionable, since it
is very hard to identify and reach only customers with blue eyes
Segments must be large and profitable enough to make the investment
in serving them worthwhile MyCFO.com is targeted toward
high-net-worth individuals, helping them manage their portfolios;
even though the number of those individuals is small, the dollar
amount managed is sizeable, thus constituting a substantial segment
Key characteristics of the segments (e.g., size and spending
patterns) must be easy to measure
Slide 19
Research #3 Concept testing - Old school approach - Ask
respondents to score a concept - Often respondents dont know why
they selected something - 95% of decisions made in the subconscious
- Halo effect of other product features - Lack of realistic
decision making setting Choice modeling - New school approach -
Calculates attribute utilities - Taps into respondent
subconscious
Slide 20
If the following salad menu items were available at (your
concept), how many of each item would you probably purchase for
yourself in the next 30 days? (Please Type The Number Of Each Item
You Would Purchase In the Boxes Next To Each Item Below) Beet and
Goat Cheese Arugula Salad- $6.99 Healthy Turkey-Pasta Salad - $6.99
An amazing salad made with beets, avocado, arugula, dried
cranberries and walnuts. The goat cheese and the beet make a
perfect great with balsamic vinegar. A super healthy dish with
rotella pasta, fresh broccoli florets, and cooked turkey breast,
combined with dried cherries, celery, chopped onion, and toasted
almonds. Soy Sauce-Grilled Shrimp with Spinach Salad- $6.99 Grilled
soy-sauce shrimp tossed with fresh baby spinach, green onions,
cilantro leaves, and salted peanuts. This dish is a true winner! I
would not buy any of these products. I would buy something else.
(Once You Have Answered The Question(s) Above, Please Click On The
Next Page Button Below.) Creamy Fruit Salad - $6.99 A fresh creamy
salad with pineapple chunks, melon chunks, watermelon chunks, and
chopped fresh mint leaves. Served with yogurt and honey dressing,
with toasted sweetened shredded coconut on top.
Slide 21
A more realistic choice modeling example
Slide 22
Product Innovation and Development #4 Product diffusion curve
Market Adoption First to Market Fast Follower Me Too Entrant
Laggard Typical Hockey Stick Adoption Curve Time Source: Frank Bass
(1969), A New Product Growth for Model Consumer Durables,
Management Science, 15:5, 215-227
Slide 23
Stage-Gate Process of Product Development Idea Generation Idea
Screening Product Design Prototype Development Concept Development
Management Review Business Analysis Management Review Test Market
Commercialization Source: Cooper, Edgett, Kleinschmidt (2002),
Optimizing the Stage-Gate Process: What Best Practices Companies
are Doing Part 1, Research Technology Management, 45:5, 21-27
Slide 24
New Concept Generation Techniques Six major techniques to
generate ideas and concepts 1.Needs assessment what does the
customer need 2.Scenario analysis where do trends take us 3.Group
creativity getting creative people together 4.Attribute analysis
identify and score each attribute 5.Relationship analysis look for
new connections 6.Lateral research look sideways at the
product
Slide 25
Key Factors Influencing Product Adoption Reflect a relative
advantage over other competitors Have compatibility with customers
environment Minimize complexity of use Be divisible (trial-able in
small numbers) Be communicable (easy to observe the word-of-mouth
impact)
Slide 26
Pricing and Profitability Three basic approaches to Pricing
1.Cost Plus calculate cost and add a margin 2.Competitive same
price as everyone else 3.Market based what the customer is willing
to pay #5
Slide 27
Fairness in Pricing Key Components of Reference Price Past
prices Close substitute prices Context or purchase environment
Environments in Which to Consider Under-pricing (Fairness) The
market clearing price is much higher than some well-established
reference price Ongoing pecuniary relationship between buyer and
seller When Fairness is Important When there is an ongoing
relationship between buyers and sellers When the seller has
significant market power over buyers
Slide 28
Brand Equity, Loyalty, and Satisfaction #6 Product, Price,
Communication, Community, and Distribution Programs Wrap-Arounds
Core Product / Service... provides positive consumer responses... A
good brand... Customer Benefits Confidence Loyalty Satisfaction
Customer Benefits Confidence Loyalty Satisfaction Firm Benefits
Reduced marketing costs Increased margins Opportunity for brand
extensions Firm Benefits Reduced marketing costs Increased margins
Opportunity for brand extensions... and benefits both target
customers and the firm Brand Awareness Depth Breadth Brand
Awareness Depth Breadth Brand Associations Strength Relevant
Consistent Valence Uniqueness Memorable Distinctive Brand
Associations Strength Relevant Consistent Valence Uniqueness
Memorable Distinctive Source: David Aaker (1996), Building Strong
Brands, (New York, NY: Free Press)
Slide 29
Transactions versus Relationships Transactions Old School
Oriented to making the sale Little up-front investment Price
orientation No lasting value or loyalty Relationships New School
Oriented to building a relationship Significant up-front investment
Customer need orientation Long term value and higher loyalty
#7
Slide 30
Impact of the Internet Cycle time Competitive Comparison of
identical offerings Exploration of alternatives variety seeking
Broader selection of alternatives Elimination of brick-and-mortar
restrictions (time, location) Significant reduction of brand
loyalty among consumers #8 Source: Jerry Wind and Vijay Mahajan
(2001), Digital Marketing: Global Strategies from the Worlds
Leading Experts, (New York, NY: John Wiley & Sons, Inc.)
Slide 31
Growth and Expansion #9 Market Penetration Product Development
(product improvements, (line extensions) cost reductions) Market
Extensions Diversification (new uses, new markets)
(new-to-the-company, new-to-the-world) Products ExistingNew
Customers New Existing Source: Kenneth Kahn (2001), Product
Planning Essentials, (Thousand Oaks, CA: Sage)
Slide 32
International Issues Cultural differences Four basic themes
Individualism-Collective Index Power-Distance Index Uncertainty
Avoidance Index Masculinity-Femininity Index The scores are neither
good nor bad, just different ways in which cultural values are
evidenced #10 Source: Geert Hofstede, Cultures Consequences, 2 nd
ed. (Thousand Oaks, CA: Sage, 2001)
Slide 33
Individualism-Collective Index Self-orientation (the I versus
the We) Playing and working separately or together Higher IDV
scores tend to represent individual initiative USA - IDV is 91
rugged individualists India - IDV is 48 team cohesiveness South
Korea - IDV is 18 very group oriented
Slide 34
Power-Distance Index Focuses on authority orientation The
importance of hierarchies and position High PDI scores tend to
reflect higher levels of power inequality between levels of society
Mexico - PDI is 81 your position is fairly fixed USA - PDI is 40
anyone can be President New Zealand - PDI is 22 you make your own
way in life
Slide 35
Uncertainty Avoidance Index Orientation toward risk acceptance
or avoidance Higher scores tend to be uncomfortable with ambiguity
and less responsive to new ideas and behaviors Greece UAI is 112
make it solid as concrete France UAI is 86 certainty is a good
thing USA UAI is 46 fairly willing to take risks in life, face
uncertainty
Slide 36
Masculinity-Femininity Index Focuses on assertiveness and
achievement Found to be less predictive and useful than the other
three indices
Slide 37
International Product Development Five main strategies
1.Straight extension no change to the product 2.Communication
adaptation same product, only change the promotion aspects (color,
language, name) 3.Product adaptation adapting a product to meet
local conditions 4.Dual adaptation altering both communication and
product 5.Product invention new product for the local market
Source: Solberg and Durrieu (2008), Strategy Development in
International Markets: A Two-Tier Approach, International Marketing
Review, 25:5, 520-543.
Slide 38
Collaborating on International Teams Five themes to consider
Time perception differs across cultures Space personal space, being
alone or in groups Things belongings, gifts Friendships personal
relationships Agreements the way contracts are executed
Slide 39
Being Effective with a Balanced Scorecard The balanced
scorecard allows the business to evaluate where it is across the
major business dimensions Dimensions include Financial Performance
creating profits for shareholders Customer Performance creating
demand in primary and secondary segments and satisfying brand
promises Internal Business Processes the areas of excellent
efficiencies that drive business economies Organizational Learning
innovating and investing in the future Source: Kaplan, R.S. and
Norton, D.P. (1996), Using the Balanced Scorecard as a Strategic
Management System, Harvard Business Review, 74(1), 7585.
Slide 40
Critical Blind Spots Sacred assumptions Not invented here Value
is obvious
Slide 41
Success Within the Organization Six main themes for improving
your product development and introduction success rate 1.Ask your
customers for candid feedback 2.Set realistic a priori goals
3.Break down walls in the company 4.Create gateways to pass or fail
development projects 5.Watch the tests carefully 6.Do
postmortems
Slide 42
Free Helpful Resources www.secondarydata.com Marketing and
research portal www.secondarydata.com https://www.cia.gov/factbook
- Country by country factbook https://www.cia.gov/factbook
www.1to1.com Customer Relationship Management site www.1to1.com
www.btobonline.com B2B Marketing resources www.btobonline.com
www.adbrands.net - Advertising and agency resources
www.adbrands.net www.patentcafe.com Patent and IP resources
www.patentcafe.com www.packworld.com Packaging strategy resources
www.packworld.com www.iccwbo.org International Chamber of Commerce
www.iccwbo.org
Slide 43
Contact Information Michael Richarme, Ph.D. Ph. 817-337-8576
Cell 817-797-5294 Email (work):
[email protected]@decisionanalyst.com Email
(school): [email protected]@uta.edu Website:
www.uta.edu/faculty/richarme/www.uta.edu/faculty/richarme/