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Marketing Management Thinking
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt Brace & Company, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.
Definition of marketing management
Marketing management is the management of the innovation
and imitation processes that firms use to identify and increase customer satisfaction and reduce
costs faster than their rivals.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
The Study of Marketing Management
The study of the innovative and imitative ways that firms identify and satisfy customers.
Ralph Starr Butler’s “Marketing Management” 1914.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
What-To-Do Lists from the First Marketing Management Textbook
How to Study the MarketWho are the people that make up the market?Consideration of those who buy and those who influence the buyer.
Men, women, or children?Rich or poor?Occupations.Environment-city, town, or country dwellers.
Where do they live?Is market international, national, sectional, or local?What limits it?Can it be extended?Climatic influence.
When do they buy?Buying seasons.Extending the seasons.When do buyers enter the market? Copyright ©1997 Harcourt Brace & Company.
All Rights Reserved.
What-To-Do Lists from the First Marketing Management Textbook (Continued)
How to Study the Market
How do they buy?
Is it hard or easy to change buying habits?
Do they buy from dealers or from manufacturers?
Do they expect credit?
Do they buy in large or small quantities?
How much will they buy?
Total consumption of all competing products.
Is the market growing or shrinking?
Total consumption in restricted territory.
Per capita consumption.
Comparison of consumption and production.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
What-To-Do Lists from the First Marketing Management Textbook (Continued)
How to Study the Market
From whom do they buy?
Total number of competitors.
Resources of each.
Relative strength of competitors.
Prosperity and goodwill of each.
Marketing methods of competitors.
Sales channels.
Prices and profits.
Transportation problems.
Influence on size of market.
Influence on prices, profits, and other selling factors.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
What-To-Do Lists from the First Marketing Management Textbook (Continued)
Steps in Reaching the Market1. Selection of trade channels.2. Determination of sales policies.
Advertising.Credit.Price maintenance.Returned goods.Guarantees.Treatment of customers.
3. Charting the cost of marketing.Complete budget of estimated expenditures, sales and profits.
4. Organization of salesmen and of advertising.Definite schedules of all forms of selling activity.
5. Coordinating the salesmanship and advertising.6. Getting distribution and cooperating with dealers.7. Plan for detailed records of actual expenditure, sales, and profits.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
The Evolution of Thought
1950-1970 textbooks by McCarthy and Kotler write about concepts and methods.
Three concepts are universally presented: 1. The marketing concept 2. The synergy concept 3. The product life-cycle concept
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
The Marketing Concept
The firms that flourish focus on identifying and satisfying customer needs.
Competition forces sellers to focus on satisfying the customer.
Firms that market innovations create and shape customer demand and satisfaction.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
The Synergy Concept
The firm that creates marketing and management tactics that fit together well and coordinates their implementation in the right order will do much better than the firm whose tactics and implementation are confused and disjointed.
Total Quality Management combines the marketing and synergy concepts.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Types of Synergy
Served market overlap Product/service positioning
‘complementarities’ Implementation process coordination
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
The Product Life-cycle
Like a living organism, a product goes through a birth stage, growth stage, mature stage and decline stage.
Firms should emphasize different marketing strategies and tactics at different stages.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Redirect focus and promotion
Invest in expanding production
Build inventory
Expand distributor network
Train expanded sales force
Institute marketing controls
Invest heavily in advertising
Target best prospect: innovators and enthusiasts
Use most loyal distributors
Use free samples
Public demonstrations and trade shows
Publicity and endorsements
Bed down quality control
Make final product and service modifications
Use specialist media and catalogs
Freeze investment in plant
Productivity review
Special trade promotions to keep channels happy
Focused attacks on vulnerable competitors
Long-term price reduction or at least a short-term price promotion
Keep plant at maximum capacity and subcontract excess
Strongly defend home-market niches
Prune product lines
Emphasize gross contribution rather than market share and sales volume
Review logistics: prune costs
Reduce pioneering sales force effort, more telemarketing
More trade than consume promotion
Introduce flankers, private labels, generics
Reinvest in market research and R&D
Use promotions to increase heavy-user loyalty
Cut low gross margin products from the line
Withdraw from channels in order of their unprofitability
Freeze R&D and product modifications
Freeze advertising and promotions
Attempt to maintain price to the end
Buy back remaining stock and redistribute
Maintain spare parts and service
Consider divesting while it is still a going concern
Rapid expansion of distributors
Product line expansion
Niche marketing
Continued heavy promotion
Sales force incentives and management
Encourage referrals
Search for new sources of supply
Need to balance supply and demand
Stock out and back order damage control
Product Life-Cycle Stages and Marketing Tactics
Sales
Launch Takeoff Rapid Growth Shakeout Maturity Decline Time
Product Life-Cycle Stages and Marketing Tactics
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
New Thinking in Marketing: The Delta Paradigm
How and why is the market changing? What is driving the change? Markets are becoming hypercompetitive:
when several sellers are aggressively innovating new products, distribution channels and cost-cutting processes, and quickly imitating successful innovations.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Three Basic Competitive Drives
Drive to improve customer satisfaction through increasing quality and reducing price.
Drive to reduce costs by increasing process efficiency without reducing output quality.
Drive to improve the speed and adaptability of key processes.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Macro Competitive Rationality
Micro Competitive Rationality
Buyers’ preferences and wants are always being changed by changes in supply.
The variation in consumer demand is constantly changing
Sellers learn directly and by observing other sellers how to serve customers more effectively
Sellers with more acute and less biased perceptions of how the market is changing are more competitive.
The variation in the supply offering is constantly changing
Supply will shift to serve the demand of the most profitable market segments
The economic process changes the economic structure. The economic structure changes the social structure.
Sellers who can implement their innovations and imitations faster are more competitive.
Markets are always in disequilibrium. Competition increases when supply exceeds demand.
Sellers who possess an insatiable self-improvement drive are more competitive.
Effective product and process innovations are quickly imitated and improved
Sellers are driven by competition to experiment with new, innovative ways of serving customers
The Macro and Micro Theories of Competitive Rationality
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Buyers’ preferences and wants are always being changed by changes in supply
Suppliers’ products and processes are always being changed by changes in demand
The three competitive rationality drives
accelerate the flow
The variation in consumer offering is constantly changing
The variation in supply offering is
constantly changing
The Perpetual Motion Machine That Increases the Efficiency of Free Markets
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Competitive Rationality
The competitive thinking and marketing decision making of a firm in a competitive market.
Great marketing entrepreneurs are driven, possess great alertness and insight, and introduce new ways of doing things quickly.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
General Theory of Competitive Rationality
Variations in the response rate of buyers and sellers to changes in supply and demand create opportunities that are exploited by the marketing entrepreneur.
Changes in economic processes drive changes in the economic and socio-political structure.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.
Common Elements in the Marketing Skills of Great Entrepreneurs
They possess unique environmental insight, which they use to spot opportunities that others overlook or view as problems.
They develop new marketing strategies that draw on their unique insights. They view the status quo and conventional wisdom as something to be challenged.
They take risks that others, lacking their vision, consider foolish.
They live in fear of being preempted in the market.
They are fiercely competitive.
They think through the implications of any proposed strategy, screening it against their knowledge of how the marketplace functions. They identify and solve problems that others do not even recognize.
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Common Elements in the Marketing Skills of Great Entrepreneurs (Continued)
They are meticulous about details and are always in search of new competitive advantages in quality and cost reduction, however small.
They lead from the front, executing their management strategies enthusiastically and autocratically. They maintain close information control when they delegate.
They drive themselves and their subordinates.
They are prepared to adapt their strategies quickly and to keep adapting them until they work. They persevere long after others have given up.
They have clear visions of what they want to achieve next. They can see further down the road than the average manager can see.
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Mental Model of the Market
How the development team collectively “thinks” about the market. How it frames and organizes its thinking. How the “spin” is put on new events and facts.
How market research should scan the market and present intelligence to team.
Used as the basis for assessing the fit between the organization and its environment.
Copyright ©1997 Harcourt Brace & Company.All Rights Reserved.