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The art and science ofCreating &Communicating value toCustomers

Originally scripted by

Philip Kotler

Kellogg School ofManagement

Brought to this classroom by

Easwar Krishna Iyer

Great Lakes Institute ofManagement

Communicating value Creating value

ONE

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C C

1. Basics of Marketing2. Basics of Strategy3. Environment analysis4. STP5. 4 Ps of kotler

1. Product2. Price, Place, Promotion

6. Services marketing7. B2B Markets8. Global Markets

MM1

MM2

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1. Definitions of Marketing

2. What Gets Marketed?

3. Needs, Wants & Demands

4. Basics of STP5. Porters Value Chain & Core Competence

6. Case Study No. 01 : Marketing Myopia

7. Corporate Vs. Business Strategy Planning

A. Corporate Strategyi. Define Corporate Missionii. Establish SBUsiii. Assign Resources [Intro to BCG Matrix]iv. Assess Growth [Intro to Ansoff Grid]

B. Business Strategyi. SWOT Analysisii. Opportunity / Threat Matrixiii. Goal Formulationiv. Strategy Formulation [Porter]v. Program Formulation / Implementation

8. Case Study No. 02 : The IPL Case

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Chapter 1Defining Marketing for the 21st Century

Chapter 2

Developing Marketing Strategies & Plans

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Shortest definition of Marketing

Marketing is Meeting Needs Profitably

HUL identifies a Need of the market

Freshness

It packages freshness the need into aproduct called soapCreation element

Then it Communicatesfreshnessthrough a catchy image A lime fresh girl

bathing under a lime fresh waterfall

Finally HUL meets its basic objective itProfitably meets markets need calledfreshness through its product called soap

This is marketing in its essence

Meeting a need profitably.

Product

Boost

Lifebuoy

Need

Energy

Health at low cost

Communication

Boost is the secret . Sachin(Why not Aishwarya?)

Thandurusti ka raksha . - RusticFootball players (Why not stars?)

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American Marketing Associations Definition of Marketing

Marketing is an organizational function and a set of processes forcreating, communicating, and delivering value to customers andfor managing customer relationships in ways that benefit the

organization and its stakeholders.

LalithajiTypical no-compromise,

quality conscious, bargaining Indian housewife

Surf ki kharidaari mein hi zyaada samajhdari haiBhai saab, aagar itni saari safedi yadee kam daam me mile....... Tou koi yeh kyoun le ?

SURF First creating a Product that meets a verycommon need (brightness / whiteness)

Then Pricing it at an affordable point for theIndian middle class (At lower price point, we haveNirma. At higher price point Ariel) [creating contd...] Then Placing it using multiple marketingchannels all over the market (The delivery element) Finally Promoting it by effectivelycommunicating its value proposition

For which P is Lalithaji pitching? And against which competitor?Continued

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The Peter Drucker definition - Delineates Marketing from Sales

There will always be a need for some selling. But the aim of marketing isto make selling superfluous. The aim of marketing is to know andunderstand the customer so well that the product or service fits him andsells itself. Ideally, marketing should result in a customer who is ready to

buy. All that should be needed is to make the product or service available.

TATA ACE

Growing Indian Economy This growth is reaching out to rural markets

Demand for smaller vehicle for narrow roads

Last mile delivery (smaller sub-one-ton load)

Safety & comfort of 4 wheeler

Prestige of 4 wheeler (compared to auto)

Willing to pay more for social status

Mini Size High Quality Standards Higher Speed (wrt auto)

Wider cargo Bed Low turning radius Sporty front end

Within 2 years, the Tatas rolled out the 1,00,000thACEContinued

SmallisBig.

Introduction to Environment Analysis

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Services

Experiences

PersonsPlaces

Organizations

Information

Ideas

Events

Properties

Goods 1

2

3

4

5

6

7

8

9

10

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Goods1

Continued

Goods are Physical Goods They are Tangible Before buy, there is a Touch & Feel about Goods

Automobiles Consumer Durables Electronic Goods

FMCG Goods Industrial Raw Materials Textiles / Apparels

Furniture Cosmetics Heavy Machinery

Books Electrical Fittings Computers

Durables Vs. Consumables White Goods Vs. Brown Goods

Industrial Vs. Domestic B2B goods Vs. B2C goods

Intermediary Vs. Finished goods Raw Vs. Processed goods

Cheap Vs. Premium goods Perishables Vs. Non-perishables

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Services2

Continued

Any Act, Performance, Process or Benefit,

that does not result in the customer owning anything.

Banking Hospitality Airlines Healthcare

FinancialServices MobileTelephony LegalServices Media

Education Beauty care Consultancy IT / ITeS

Cellular Telephony is a Service

Cellular Phone is a Product

4 Characteristics of a Service Simultaneity [Shampoo & Shampooing]

Heterogeneity [Course & Faculty]

Intangibility [Software, Legal Advise]

Non- Inventorability [Airline seats of yesterday]

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Pure Product Marketing Vs.Product + Service Marketing Vs.

Pure Service Marketing

Difficult toevaluate

Easy toevaluate

MostlyGoods

MostlyServices

Can Market theSEARCH

qualities

Can Market ONLY theEXPERIENCE

qualities

+Market (?)

CREDENCE

qualities

ServicesMarketing

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Events3

Continued

Olympics

T 20 World Cup / IPL

Trade Fairs

Performances / Shows

Seminars, conclaves,workshops, pressmeets, book release etc

A time-bound event that is neither a product nor a

service Yet it requires marketing

Event marketing is aimed at both Customers &Consumers

Customers : For sponsorships, advertisements etc

Consumers : Tickets, TV viewership etc

One of the most successfulexamples of Event Marketing

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Experiences4

Continued

Unlike an event, an experience is not a time bound happening. It

is perpetual and hence has to be continuously marketed

An orchestration of several goods and service offerings

What you eventually sell ( i.e., what the consumer eventually buys )is an integrated Experience

The marketing effort underplays the individual offerings andfocuses on the aggregate

Paris Lido Show is an Experience

Dubai Shopping Fest is an Event

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Persons5

Continued

Don't confuse with celebrity endorsements.

In endorsements, what is marketed is the product(Boost / Santro). The endorser (Sachin / Shahrukh)is only an attester for quality / performance.

In Celebrity Marketing, an agency markets thecelebrity as a value proposition to advertisers

Marketing ofDavid Beckham

The marketingcould be doneeither by self or byprofessional

agencies like IMG

When you sell an AR Rahman CD, do you sell Music or Rahman?

Obama & the recent US Presidential elections

Marx & Co. and Kerala elections

Shivaji and Siva sena [Maharashtra]

All Gandhis for Congress

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Places6

Continued

Bangalore as Silicon Valley of India To IT clients

Kerala as Gods own country To all tourists

Malaysia as Truly Asia To tourists & investors

India itself as Incredible India To international tourists

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Properties7

Continued

Real Estate properties Buying, renting, leasing, hiring etc

Financial properties Stocks, bonds, commodities, etc

Has the feel ofGoods & Services

Kotler has separatelycategorized them as

Property because oftheir Intangibility

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Organizations8

Continued

Corporate Ads with logo Tata, Kingfisher, ICICI

Election Ads with Symbol

Hand, Lotus, Elephant

Universities, NGOs, Hospitals.

Amrita, Apollo, Red Cross

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Information

Ideas

9

10

Continued

What does a website sell?

How is a book promoted?

What does a brochure /pamphlet sell?

What does Google sell?

Hindutva Hindutva & BJP

AIDS awareness campaign

Family Planning Campaign

Jagore.com The recent

voting campaign

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Needs / Wants / DemandsHow they relate to Marketing

Needs are basic human necessities

Needs are NOT created / shaped by marketers

NEEDS PREEXIST MARKETING

EnergyHealth

SleepoodSecurity

FulfillmentReputation

KnowledgePrivacySelf-Actualization

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Needs / Wants / DemandsHow they relate to Marketing

& Maslows Hierarchy

Physiological & Biological NeedsAir, food, drink, sex, sleep

Safety NeedsSecurity, employment, law & order

Social (Belongingness) NeedsFamily, friends, affection

Esteem NeedsStatus, respect, reputation

Self - Actualization NeedsFulfillment, lack of prejudice etc

Placement

Networking

Promotion

Knowledge

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Continued

Needs / Wants / DemandsHow they relate to Marketing

Need

Types

Stated

Real

Unstated

Delight

Secret

A rich man wants a secondcar for status again a

esteem need at his levelamong his peers

I want an expensive higherend car

Expensive implies initialcost. Even a rich man

would like a good mileage

It should have features thatlower end car ownerscannot afford

Weekend stay in a 5 star

hotel with every carpurchase type scheme

Been seen by friends asone who has hit big time

A middle class man hasa requirement for

transportation Anesteem need at his level

I want an inexpensivecar

Inexpensive impliesrunning cost as well as

initial vehicle cost

Good life long service &good resale value

Extended warranty,

more accessories etc atsame price

Been seen by his friendscircle as a value for

money customer

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Continued

The cash rich urbanyouth population hasa requirement for

Stated Need

Real Need

Unstated Need

Delight Need

Secret Need

I want a powerful motor bike

I need power. I need enhanced machismo.I want a tool called motor bike which will accentuate this effect

I want this powerful me to be noticed.Powerful headlights, noisy engine, flashy indicators, loud horn

My powerful bike to be ergonomically designed tooSlanting seat which will make her slide towards me !!

Sex Appeal

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Continued

Needs / Wants / DemandsHow they relate to Marketing

Needs become wants when the customer directs hisattention towards a specific object that satisfies his need

Wants are first shaped by the society

Then they get productized by marketersNeed to Want Mapping

An American needs foodHe wants burgers, french fries

& coke

An Indian needs foodHe wants roti, dal & buttermilk[Amul Masti meets this want]

A daily wage laborer needsmobility (transportation)

He wants a cycle

A recently became rich manneeds status / recognition He wants a club membership

A house wife needs additionalfinancial safely for her family

She wants a part-time job

Needs cost effective hygiene She wants to buy Lifebuoy soap

Needs cost + quality balance She wants a mid-range soap

Needs beauty at any cost She wants to buy Dove soap

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Continued

Needs / Wants / DemandsHow they relate to Marketing

Needs become wants when the customer directs hisattention towards a specific object that satisfies his need

Want becomes demand for a specific product when thecustomer has the ability to pay

Willingness & interest by itself does not create a market

Demand comes when it is backed by buying power

Every society has a needfor shopping

With economic liberalization, higher growth rates, higherdisposable incomes, more internet driven awareness and

more internationally exposed Indians, there is a wantformodern retail outlets in every city

Butdemand for a mega format full scale mall will exist onlywhen:

o There is a critical mass of high end buyers

o The political climate of the state is pro-consumerist

o Demographic & cultural climate

o High end salaried class (like say IT) present in plenty

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1. Negative Demand : Consumers dislike product, will pay to avoid buying it

Vaccination, Vasectomy, barber shops in Sardarji area, pork in Islamic countries

2. Non-Existent Demand :Unaware of or disinterested in such a product

Ski equipments in India, NonEnglish European movies, Air-conditioned auto rickshaw

3. Latent Demand :Have a strong need not satisfied by an existing product

Navigational aid in cars, e-mail access during travel, bed-cum sofa for small residences .

Non-side-effect cigarettes, 24 hour battery back up laptop, Alternative fuel cars, Mac speed

trains, medicine for baldness, learning through e-classes from home, Massaging shoe .

4. DecliningDemand :Yesterdays products. Losing market today

Scooters, typewriters, B/W Television, Pagers, non-AC theaters, bell bottoms, housewives

5. Irregular Demand : Seasonally varying purchase

International holidays, Umbrellas, Text books / uniforms, Event-driven brand length extensions

6. FullDemand : Whatever is produced is adequately consumedNormally priced FMCG goods, moderately priced consumer goods, salt, atta, milk, vegetables

7. Overfull Demand :Current demand is not met by current supply

NANO, Modest high quality apartments, Education seats (MBA, Engineering, Medicine)

8. UnwholesomeDemand : A demand that has undesirable consequences

Alcohol , sexual liberation & freedom etc

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Grouping the entireconsumer marketusing a combinationof buying criteria

Choosing whichgroup to sell, basedon your perceptionof attractiveness

Select appropriatemarketing mix for thetarget segment thatyou have chosen

Identifyvariables andsegment the

market

Developprofiles ofresulting

segments

Evaluateattractivenessof each

segment

Select yourtarget

segment

Identifypositioningconcepts foreach targetsegment

Communicatethe chosenpositioning

concept

1

2

3

4

5

6

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Continued

Example : Food Processing Industry

The Indian Food Processing Industry size : US $ 70 billion

(As per Ministry of Food Processing, Government of India)

Food processing industry contributes 7% to Indias GDP

With agri - produce to processed food conversion being lessthan 10%, processed food is a huge market for the future

Product-wise Segments Market-wise SegmentsChildren

Youth

House wives

Working women

College Students

Men

Young Mothers

Elderly couples

Live-ins, single parents

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Continued

Target Market

Target market for Nestle ischildren (0 14 age group)(Except for Nescafe)

31% of Indian population is

this age group

This demographic dividendwill continue till 2020

Plus children are brand loyal

Great Target Choice

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Continued

MBA Aspirant Clusters & Targeting

Primary focus on extreme academic brilliance

Killer instinct & go-getter attitude

No income specificity for family

Perfectionist attitude

Primary focus on 3-4 years work experience

Between form and substance, focus marginally more on form

Coming from upper middle class and above homes Ruthless corporate climbers

Primary focus on human values

Coming primarily from Indian middle class homes

Between form and substance, focus clearly on substance

Good people first, good managers next

Primary focus on earn & learn together

Has to be from in and around Chennai

Might not crack a CAT or a GMAT with a high score

Switching from technical to managerial roles an aspiration

IIMs

ASB

PGPM

PGWPM

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Continued

Positioning

Is the science / art of designing

the companys offering / product / service

plus its associates imagery in such a way that

it occupies a distinctive place (USP space)

in the target markets mind

3 Steps forImplementing

Positioning

1. Identifying all Possible Competitive Advantages -Competitive Differentiation

2. Selecting the Right Competitive Advantage -Unique Selling Proposition (USP)

3. Communicating and Delivering the Chosen Position

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Continued

Continuing onNestl's STP Story

Market-wise Segments forProcessed Food

Men Youth

Young Mothers Children

Elderly couples House wives

Live-ins Working women

Single parents Students

Chosen Target Market

How do you Position to this segment ?

1 Logo : Mother feeding her babies, an imagewhich has a subconscious connect

2 Name : Synonyms are Nuzzle, Snuggle,Cuddle all synonymous with children

3Ads : Even for a product that is not a childonly, the focus is on the hunger of the child Mummy bhook lagi hai; beta do minute

Th N V l C ti & D li S

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The New Value Creation & Delivery Sequence

Marketing is there right from the Beginning

Unlike old times when there was first Production, then Marketing

Continued

CustomerSegmen

tation

MarketSelection/

Target

ValuePositioning

CHOOSE

Pro

ductDevelopm

ent

Ser

viceDevelopm

ent

Pricing

Sourcing&Making

Dis

tributing&Servicing

PROVIDE

Sal

esForce

Sal

esPromotion

Advertising

COMMUNICATE

Strategic Marketing Tactical Marketing

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A tool for delineating CORE COMPETENCE

5 Primary ActivitiesThat proceed in a specific flow

4 Support ActivitiesSupport all primary activities