MGT%206450%20Marketing

1
MGT 6450 Marketing

• Web Main Menu
• Syllabus
• Schedule Outline
• Web Resources
• Class e-mail
• News
• Overview of marketing
• Small group formation discussion of
  products/services via product life cycle
• Next week market segmentation

2
Marketing News

• Generational Marketing
• Niche trends for 2009
• Advertising Age
• AMA Marketing News
• Direct Marketing News
• Marketing Today

3
"Marketing is the process of
planning and executing the
conception, pricing,
promotion, and distribution of ideas, goods,
services, organizations, and events to create and
maintain relationships that will satisfy
individual and organizational objectives."
The societal marketing concept holds that the
organization's task is to determine the needs,
wants, and interests of target markets and to
deliver the desired satisfactions more
effectively and efficiently than competitors, in
a way that preserves or enhances the consumer's
and the society's well-being.
4
Discussion Questions

• How is marketing currently conducted in your
  organization? What role does a marketing
  department have in helping form organizational
  strategy how well connected are they with other
  departments and functions in the organization
  how is market information gathered, analyzed and
  used?
• What are the change drivers that have propelled
  marketing to this position in organizations? Why
  is strategic marketing so crucial in today's
  marketplace?
• In your organization, where does marketing fit
  with strategic planning?
• How aware are employees of the marketing concept
  and efforts of the marketing department?
• Examine your organization's mission statement and
  define it from product/service perspective as
  well as marketing perspective (who are the
  customers what needs are you committed to
  satisfying?)
• Using the Product Life Cycle, place your
  product/service line along the continuum
  (Portfolio methods)

5
How is marketing done in your organization?
6
Change Drivers What are the large scale forces
that are driving organizations to change? Give
examples of each (e.g., globalism, demographics,
technology, information, environment, etc.)
Organizational Impact What do these forces
require the organization to do differently?
(competition, new markets, faster response, etc.)
Organizational Response What are organizations
doing to make themselves more competitive and
adaptive? List some of the initiatives
(downsizing, reengineering, outsourcing, etc.)
What are the differences between the
marketplace/workplace you work in and that of
your parents grandparents? (e.g., YOU Inc,
multiple careers, lower commitment, etc.)
Worker Requisites What are the implications for
workers--what are the requisite KSAs? (e.g.,
continuous learning)
Impact of Change Drivers on the Workplace
7
Change Drivers
Effects of Change Drivers

• Competitive environment
• More informed customers
• More evenly distributed technological
  capabilities among competitors
• More closely linked suppliers
• Easier entry for new competitors
• World wide market for supplies and workers

• Less expensive, more widely available
  communications, transactions, information, and
  production technologies such as
• Internet based communication and commerce
• Data mining
• Pattern recognition algorithms (neural networks)
• Computer integrated design
• Rapid prototyping
• Simulation testing of designs and prototypes
• Real time data tracking
• Nanotechnology
• Flexible manufacturing technology
• Enterprise wide software

• Business processes
• More knowledge about customer buying patterns
• Improved forecasting ability
• Improved production scheduling and tracking
• More rapid production process design

• Integration
• Coordination of geographically dispersed
  operations
• Coordination of culturally diverse workforce
• Coordination of logistics and information with
  dispersed networks of customer and suppliers

• Culturally, ethnically diverse workforce that is
  more mobile
• Political and economic conditions creating more
  opportunities for markets and supplies worldwide
• Aging workforce worldwide
• Language and culture differences

• Workforce
• More use of temporary workers
• Competition for skilled and knowledge workers
• Management across international cultures
• Difficulty in molding organizational cultures

8
(No Transcript)
9
Whats gone wrong with strategy?

• 75 of executive teams do not have a clear
  customer propositions
  (idea of the mix that appeals to
  the target market)
• 20 of organizations take more than 16 weeks to
  prepare a budget, with
  many not completed by the start of the fiscal
  year
• 78 of companies do not change their budgets
  within the fiscal cycle, even if the rest of the
  world changes around them
• 85 of management teams spend less than one hour
  per month discussing strategy
• 60 of organizations don't link strategy and
  budgeting
• 92 of organizations don't report on strategic
  lead indicators
• Less than 5 of an organization's workforce
  understands its strategy
• Only 51 of senior managers, 21 of middle
  managers, and 7 of line employees have personal
  goals linked with strategy
• Organizations find that up to 25 of strategy
  measures change each year
• Tangible book value represented only 62 of
  industrial organization's market value in 1982
  in 1992 it was 38, and 10-15 in 2000
• The failure rate of strategies is between
  70-90, due primarily to poor implementation

10
(No Transcript)
11
(No Transcript)
12
(No Transcript)
13
The Balanced Scorecard
14
Eras of Marketing
Next ?
Relationship/Partnering Era (1990-) Short term
financial focus, downsizing, globalization,
reengineering trends. Publish or perish pressure
on research. Concern, trust, and investment in
collaborative relationships with long term
customers and competitors (e.g., Saturn owner
parties, Sams Club memberships, etc.).
Specialized interest areas sophisticated
multivariate segmentation wide application
Problem still short term, fragmented research,
customer manipulation
Marketing Era (1950s-1980s) Mass market boom!
Use of behavioral and quantitative sciences.
Customer is King! Find (create) a need and fill
it (market segmentation targeting) satisfy
needs! problem too short term costly
Sales Era (1925-1950s) Marketing principles.
Good advertising and sales will overcome consumer
resistance (Brand image differentiation)
Marketing associations journals problem broad
advertising not cost-effective
Production Era (1900-1925) a good product sells
itself offer more products! Build it and they
will come! problem unsold inventory. First
courses with marketing title. Focus on
distribution.
Pre-Marketing Era (1750-1900) I got it, you
want it?
15
Product Development death of an idea

• 10 of ideas reach the test market stage
• 50 of new products fail in test marketing
• 50 of those fail on national launch
• only 2.5 ever enter the marketplace
• 1 entrant for every 64 ideas
• the average new product that fails costs about
  50 million
• some product failures have losses of over 100
  million for some companies

Marketing decreases costs, improves the quality
of ideas, and ensures better fit with the
marketplace
16

• Advantages disadvantages of matrix methods

17
Team Formation

• In class group discussions
• Follow-up on absent sessions
• Presentation of Point-Counterpoint issues
• Review of each others papers for feedback

18

19
(No Transcript)
20
(No Transcript)
21
(No Transcript)
22
(No Transcript)
23
(No Transcript)
24
(No Transcript)
25
(No Transcript)
26
Whats your product lifecycle mix?
27
Team activity Construct a product life cycle
diagram for one of the companies in your team
28
Business growth Cash generation
BCG Model
Market growth cash use
29
Revenue-based
Volume-based
30

• Relative market share
• Profit margins
• Ability to compete on price quality
• Knowledge of customer market
• Competitive strengths weaknesses
• Technological capability
• Caliber of management

The GE/McKinsey Matrix
Business Strengths
High Medium Low
Invest in, growth strategy

• Market size growth
• Industry profit margins
• Competitive intensity
• Seasonality
• Cyclicity
• Economies of scale
• Technology
• Social, environmental, legal, human impacts

Monitor performance, selective strategy
Industry Attractiveness
High Medium Low
No growth or investment, consider divestment or
liquidation
31
(No Transcript)
32
Ansoffs Product/Market Matrix
Existing products
New Products

• Market Penetration
• Increase product purchase in existing markets
  (withdrawal, do nothing, consolidate,
  retrenchment)
• Revitalize brand image
• Coordinate advertising and sales training
• Adapt to market change
• Increase market share
• Increase consumer usage (frequency, quantity, new
  application)

• Product Development
• Introduce new products into existing markets can
  be risky expensive
• Product launch
• Add product features refinements
• Develop new products for same market

Existing Markets

• Market Development
• Explore new markets for existing products when
  distinctive competencies rest with product not
  market
• Expanding geographic distribution
• Targeting new customer segments

• Diversification
• introduce new products into new markets
  horizontal, vertical, conglomerate
• Acquisition/merger
• New business venture

New Markets
33
Advantages of Matrix Approaches

• Key areas. highlights essential aspects of
  business
• Cash flows. focus on cash flow requirements of
  the SBU's of a business. They help identify the
  different cash flow implications and requirements
  of different business activities that can assist
  management to carry out its resource allocation
  function.
• Balance portfolio. helps identify ways to balance
  and optimize value of the corporate portfolio by
  identifying strengths and weaknesses in the
  portfolio, the gaps that need to be filled to
  rebalance it when a new SBU needs to be added or
  when one needs to be removed. It can also tell
  when there are too many duplicative businesses of
  one type in a portfolio.
• Diverse perspective. enables systematic
  examination of diverse activities of a
  multibusiness company, and understand enterprise
  diversity.
• Flexible comparisons. Some matrices, like the
  McKinsey Matrix, are highly flexible in selecting
  different factors for different industries,
  thereby providing coverage of a wide number of
  strategically relevant variables.
• Return on Investment. (ROI) often used as a
  single measure of organizational performance
  because it is a single comprehensive figure, it
  checks accuracy of capital investment proposals,
  provides a common denominator for comparison
  across entities, and is an incentive to using
  assets efficiently.

34
Disadvantages of Matrix Models

• Too simple. Matrix models are often criticized
  for being too simplistic. For so many important
  factors to be reduced to only two dimensions
  (e.g., market share and business attractiveness)
  other factors are necessarily excluded or lose
  their distinctiveness in the collapsed
  dimensions.
• Market share mismeasure. Market share, though
  used widely, may not be the best measure of a
  company's success. For example, product
  differentiation for a particular market segment
  may have low market share but produce high
  success within a market segment.
• Market share and cash flow mismatch. High market
  share in a low-growth industry does not
  necessarily result in a large positive cash flow
  characteristics of a "cash cow" business. For
  example, the BCG would classify GM auto
  operations as a cash cow, but the capital
  investments needed to remain competitive are so
  substantial in the auto industry that the reverse
  is likely true. Low growth industries can be very
  competitive and staying ahead in such
  environments can require major cash investments.
• Attractiveness mismeasure. Industry growth also
  used widely may not be the best measure. Many
  factors in the environment affect competitive
  intensity in an industry and thus its
  attractiveness.

35

• Market share and cost savings mismatch.  The
  connection between relative market share and cost
  savings (economies of scale) may also not be a
  direct relationship. For example, in the US steel
  industry low market share companies using low
  share technology (minimills) can have lower
  production costs than high market share companies
  ising high share technologies (integrated mills).
  While the BCG matrix would classify them as
  "dogs" their performance would show them as
  "star" businesses.
• Subjective numbers. The numerical format of some
  matrices may lead the user to place greater
  confidence in them than is warranted. The numbers
  from most ratings are subjectively derived,
  subject to personal biases, political pressure,
  and budgetary needs.
• Static pictures. The analyses most often provide
  a static picture of SBU's and do not account
  adequately for how their position might change
  due to various factors such as industry
  evolution, technological change, and other
  environmental forces.
• Multiple SBU's. Not all businesses hold to the
  assumption of planning for a reasonable number of
  SBU's. For example, GE has close to 300 SBU's
  which results in information overload, and the
  resulting analysis becomes increasingly
  superficial. Thorough analysis of each holding
  simply does not become practical. Such problems
  can occur when the volume exceeds 40-50 SBU's.

36

• Conflict of interests. When a SBU contains
  several different but related businesses (as is
  often the case) conflicts of interest can occur
  between the cash flow priorities of a SBU and the
  priorities of the company as a whole. For
  example, a dog SBU may be told to divest and
  harvest its market, but it has business units
  that are rising stars that go unnoticed.
• Inappropriate divesting. Naive application of
  portfolio techniques may result in inappropriate
  divesting of useful synergistic holdings. For
  example, divesting a supplier in a vertically
  integrated company might create gretaer losses if
  that SBU provides benefits of lower production
  costs. Synergistic effects of linked SBU's is
  usually not reflected in matrices.
• ROI mismeasures. ROI has some disadvantages it
  is very sensitive to depreciation policy
  (accelerated techniques reduce it), it is
  sensitive to book value and inflation, equitable
  transfer priving (when one division sells to
  another) can be difficult to determine,
  favorability of the environment can affect SBU's
  differentially, it encourages short term profits,
  and the business cycle can affect ROI despite
  managerial efforts.

37
Conclusions about marketing matrix models--

• There is a risk of using matrix models is
  misclassifying businesses
• Use multiple models to ensure better coverage
• Know the strengths and limits of each model when
  to use and avoid them
• Integrate the information from matrices with
  other sources of information and comparison
• Don't let the matrix make decisions-- people make
  decisions!

38
Next Week Market S-e-g-m-e-n-t-a-t-i-o-n

• Be able to describe yourself using segmentation
  concepts
• Be able to discuss how your company uses (or can
  use) segmentation