KENT 29 BAD 67051 Marketing Management

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KENT 29BAD 67051Marketing Management

• Lecture 1
• Marketing Management Thinking,
• Decision Making,
• Positioning

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Text Definition

• Marketing is a social process involving the
  activities necessary to enable individuals and
  organizations to obtain what they need and want
  through exchanges with others and to develop
  ongoing exchange relationships.

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AMA Definition (2004)

• Marketing is an organizational function and a
  set of processes for creating, communicating, and
  delivering value to customers and for managing
  customer relationships in ways that benefit the
  organization and its stakeholders.

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AMA Definition (2007)

• Marketing is the activity, set of institutions,
  and processes for creating, communicating,
  delivering, and exchanging offerings that have
  value for customers, clients, partners, and
  society at large.

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or

• Marketing is the anticipation, management, and
  satisfaction of demand through the exchange
  process.

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Marketing Management

• A. Text Definition
• the process of planning and executing the
  conception, pricing, promotion, and distribution
  of goods, services, and ideas to create exchanges
  with target groups that satisfy customer and
  organizational objectives. (p.14) ugh

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Marketing Management

• B. Philip Kotler and Kevin Lane Keller (2006)
  define marketing management as "the art and
  science of choosing target markets and getting,
  keeping and growing customers through creating,
  delivering, and communicating superior customer
  value."

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Marketing Management

• C. Peter Drucker (a management guru) wrote
  "Because the purpose of business is to create a
  customer, the business enterprise has two--and
  only these two--basic functions marketing and
  innovation. Marketing and innovation produce
  results all the rest are costs. Marketing is the
  distinguishing, unique function of the business .

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Marketing Management

• D. Marketing Management is the management of
  innovative and imitative processes to identify
  and satisfy consumers more cost effectively than
  their competitors.

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II. Marketing Management Philosophies

• A. Production Concept

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A. Production Concept

• Assumes consumers want products that are
  available and highly affordable.
• Implies management should focus on improving
  production and distribution efficiency.
• Useful when
• demand exceeds supply
• product cost is too high

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B. Product Concept

• Assumes consumers want product that offer the
  most quality, performance, and features.
• Implies the firm should make continuous product
  improvements.
• Places the focus on the product, not the customer.

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C. Selling Concept

• Assumes consumers will not buy enough product
  unless there is a strong sales and promotional
  effort.
• Useful for
• unsought goods
• nonprofit areas

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D. The Marketing Concept

• Assumes that achieving the organizations goals
  depends on determining and satisfying consumers
  more effectively and efficiently than
  competitors.
• Mullins, Walker, and Boyd say
• Market-oriented firmsareamong the most
  profitable and successful at maintaining strong
  competitive positions in their industries over
  time (p. 34).

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D. The Marketing Concept

• Three parts to the concept
• The satisfaction of consumers needs, wants, and
  desires,
• at a profit (or to attain organizational goals),
• through an integrated effort within the firm.

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Notes

• Firms must identify and satisfy customers needs
  AND continue to do so!
• Competition FORCES sellers to focus on the
  consumer.
• Consumers must be seen in the context of all
  environmental/market factors (managers must have
  a market orientation).

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E. The Societal Marketing Concept

• Assumes that customer satisfaction should be
  delivered in a way that maintains or improves the
  consumers and societys well-being.
• (a customers wants/needs may be at odds with
  what is good for society
• e.g., pollution control)

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III. The Marketing Concept and

• A. Synergy
• Managers must create marketing tactics that fit
  together well.
• They must coordinate implementation.

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III. The Marketing Concept and

• B. Hypercompetition
• Competitive Advantages do not last. Customer
  Satisfaction and competition require innovation,
  cost advantages, and quality enhancements.
• Changes create new market segments, with new
  needs.

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III. The Marketing Concept and

• C. Relationships
• Long term alliances with external entities
  (customers, channel members, and suppliers)
• Cross Functional Decision Making Teams within the
  organization

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Market Opportunities
Environmental Context
PROFITS
Competitor Orientation
Company Orientation
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IV. Strategic Planning

• The process of developing and maintaining a
  strategic fit between the organizations goals
  and capabilities and its changing markets.
• Developed by senior managers
• Future oriented
• Intended to create objectives and strategies for
  success against competition.

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IV. Strategic Planning

• A. Defining the Companys Mission
• B. Setting Company Objectives and Goals
• Source of Competitive Advantage
• Development Strategy for Growth
• Allocation of Resources
• Search for Synergy

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V. Types of Corporate GROWTH Strategies
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V. Types of Corporate Strategies

• Growth Strategies for Current Markets
• Increase sales of EXISTING products to CURRENT
  markets
• 1. Market Penetration

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Market Penetration

• Increase sales of EXISTING products to CURRENT
  markets.
• Increase Market Share
• Increase Usage

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V. Types of Corporate Strategies

• A. Growth Strategies for Current Markets
• Develop NEW PRODUCTS for CURRENT markets
• 2. Product Development

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Product Development

• Develop NEW PRODUCTS for CURRENT markets to
• Meet changing CUSTOMER needs and wants,
• Match new COMPETITIVE offerings,
• Take advantage of NEW TECHNOLOGY, and
• Meet the needs of SPECIFIC market segments.

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V. Types of Corporate Strategies

• Growth Strategies for New Markets
• Bring CURRENT products to NEW markets
• 1. Market Development/Expansion

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Market Development

• Bring CURRENT products to NEW markets
• (e.g., Arm Hammer)

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Market Expansion

• Taking CURRENT products to NEW DOMESTIC
  geographic areas
• International Expansion
• Regional strategy
• Multinational strategy
• Global strategy

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V. Types of Corporate Strategies

• Growth Strategies for New Markets
• Taking NEW PRODUCTS to NEW MARKETS
• 2. Diversification

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Diversification

• Taking NEW PRODUCTS to NEW MARKETS
• (e.g., Arm and Hammer Toothpaste)

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V. Types of Corporate Strategies

• A. Growth Strategies for Current Markets
• 1. Market Penetration
• 2. Product Development
• B. Growth Strategies for New Markets
• 1. Market Development/Market Expansion
• 2. Diversification
• 3. Strategic Alliances

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Strategic Alliances

• Total collaboration by EXCHANGING key resources
  to enhance companies performance.

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V. Types of Corporate Strategies

• A. Growth Strategies for Current Markets
• B. Growth Strategies for New Markets
• C. Consolidation Strategies
• 1. Retrenchment

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Retrenchment

• WITHDRAW from WEAKER current markets

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V. Types of Corporate Strategies

• A. Growth Strategies for Current Markets
• B. Growth Strategies for New Markets
• C. Consolidation Strategies
• 1. Retrenchment
• 2. Pruning

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PRUNING

• REDUCE the number of PRODUCTS offered in current
  markets

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V. Types of Corporate Strategies

• A. Growth Strategies for Current Markets
• B. Growth Strategies for New Markets
• C. Consolidation Strategies
• 1. Retrenchment
• 2. Pruning
• 3. Divestment

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Divestment

• Selling off part of the business -- ELIMINATE a
  product and a current market.

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V. Types of Corporate Strategies
A. Growth Strategies for Current Markets B.
Growth Strategies for New Markets C.
Consolidation Strategies D. Other Corporate
Strategies
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Other Strategies

• 1. Based on Competitive Advantage
• Low Cost Leader or
• Differentiation
• --Offer a unique value to customers based on
• Design, quality, service, variety, etc.

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Other Strategies

• 2. Based on Value Disciplines
• Operational Excellence
• --Okay products, best price, least
  inconvenience
• Product Leadership
• --Innovation for best product performance
• Customer Intimacy

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VI. Product Portfolio Models

• A. The Boston Consulting Group Growth-Share
  Matrix

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The BCG Model
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The BCG Model -- Cash Cows

• Dominant in Low Growth Market
• Low Growth Sales
• Strong Profits
• Generate a Large Cash Flow
• Do NOT require Cash Resources to be Reinvested
• PROFITS flow to APPROPRIATE Problem Children

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The BCG Model -- Problem Children

• Low Market Share in High Growth Market
• High Growth Sales
• Weak Profits
• Typically, require additional Cash to become a
  Dominant Star

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The BCG Model -- Star

• Dominant in High Growth Market
• High Growth Sales
• Profitable, but requires attention
• Requires Cash and Resources to stay Dominant
• Will be a Cash Cow in the Future

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The BCG Model Dogs

• Low Market Share in Low Growth Market
• Low Growth Sales
• Weak Profits
• Typically, generate a Little Cash Flow (or have a
  weak future)
• Not a good candidate for Cash Resources to be
  Reinvested

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B. The Directional Policy Matrix
Competitive Position
Medium
Strong
Weak
Overcome, Niche, or Quit
High
Maintain Leadership
ChallengeLeader
Market Attractiveness
Challenge Leader
Manage for Earnings
Harvest
Medium
Cash Generator
Divest
Harvest
Low
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VII. Marketing Management the Marketing Plan
A. The Marketing Plan With an understanding of
the organizations mission and objectives A
Marketing Plan is written to document the current
situation with respect to customers, competitors,
and the external environment and providing
guidelines for objectives, marketing actions, and
resource allocations (text page 20)
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VII. Marketing Management the Marketing Plan

• 1. Situation and Trend Analysis
• Marketing Planning begins with a situation and
  trend analysis.with an eye toward opportunities
  and threats
• Current and potential customers
• Competition
• Environmental trends
• Other key assumptions

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VII. Marketing Management the Marketing Plan
CUSTOMER
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VII. Marketing Management the Marketing Plan

• Establish Objectives
• Goals in terms of sales volume, market share,
  and/or profits
• Select and describe the overall strategy to be
  used
• Detail the Marketing Mix
• Timing
• Responsibility

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VII. Marketing Management the Marketing Plan

• Financials
• Costs and payoffs
• Controls
• Contingency Plans

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THE MARKETING MIX
Product (Good, Service, Idea)
Price (Value)
Customer (Target Market)
Place (Distribution)
Promotion (Integrated Marketing Communications)
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THE MARKETING MIX
All this is easier said than done!! We cannot
set the marketing mix without truly
understanding the environment, the customer, and
our firms capabilities.
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VIII. Understanding Market Opportunities
CUSTOMER
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VIII. Understanding Market Opportunities
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VIII. Understanding Market Opportunities

• Macro Trend Analysis
• Demographic Environment
• Socio-cultural Environment
• Economic Environment
• Regulatory Environment
• Technological Environment
• Natural Environment

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VIII. Understanding Market Opportunities
CUSTOMER
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VIII. Understanding Market Opportunities

• Assessing Industry Attractiveness
• Porters Five Competitive Forces Model

Threat of New Entrants
Bargaining Power of Suppliers
Rivalry Among Existing Competitors
Bargaining Power of Buyers
Threat of Substitute Products
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VIII. Understanding Market Opportunities

• Micro Analysis Assessing Market Attractiveness
• Is there is a Customer Need we can fulfill?
• Is our solution special/unique?
• Is the market likely to grow?
• Is this a platform for expansion?

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IX. Measuring Market Opportunities Forecasting
and Market Knowledge
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Research and Intelligence provide information
necessary to clarify the unknown.
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A. Forecasting

• Market and Sales Forecasting is absolutely
  critical
• Forecasts drive budgets!
• Forecasting is HARD
• Every Forecast is wrong!
• WHY BOTHER?

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B. Forecasting Terms

• Total Population
• e.g., 281.4 million people living in 105.5
  million households.
• Market Potential
• Those who have an interest in the product/service
  and ability to buy
• Not all have the money or the legal status to buy

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B. Forecasting Terms

• Target Market
• Those the firm wants to serve
• e.g., 77.4 million households in the Nestles
  example
• Penetrated Market
• Those who have actually purchased the product

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US Households by Type 2000
Source U.S. Census Bureau, Census 2000 Summary
File 1.
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C. Types of Forecasts

• Top-down
• Central management determines the forecast
• Bottom-Up
• Decentralized approach individual forecasts
  are summed to the total.

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D. Sources of Forecasts

• Statistical Methods
• Observation
• Survey or Focus Groups
• Analogy
• Judgment
• Market Tests

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E. Sources of Market Knowledge

• A. Secondary Data
• Data previously collected by someone else for a
  purpose other than the one at hand

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Sources of Market Knowledge

• 1. Advantages of Secondary Data
• Almost always less expensive than primary data
• Can be obtained rapidly
• Can provide understanding of the existing
  knowledge base and gaps

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• 2. Disadvantages of Secondary Data
• Since it is previously collected data, may be
  out-dated
• May be collected only periodically
• May not have been collected in the form preferred
• May not be able to assess its accuracy

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• 3. Examples of Secondary Data
• Census Bureau data and other Government reports
• Sales Marketing Management Survey of Buying
  Power and other Industry newsletters
• Computer Databases
• The Internet

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• 3. Examples of Secondary Data
• Competitor Reports
• Scanner Data

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Sources of Market Knowledge

• B. Primary Data
• Data gathered and analyzed specifically for the
  purpose at hand

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Sources of Market Knowledge

• C. Types of Primary Data
• 1. Surveys
• Information is gathered from a sample of people
  by means of a questionnaire
• Customer Surveys Values, Benefits, Beliefs, and
  Satisfaction
• Focus Groups

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Sources of Market Knowledge

• C. Types of Primary Data
• 2. Observation
• Systematic recording of behavior or events as
  they are witnessed
• Customer Visits
• Vendor Visits
• Competitive Product Usage

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Sources of Market Knowledge

• C. Types of Primary Data
• 3. Experiments
• Cause and effect relationships by changing
  variables to observe response of another variable
• Test markets for changes in price, product,
  distribution, and promotion

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Sources of Market Knowledge

• C. Types of Primary Data
• 4. Other
• Trade Shows
• Reverse Engineering
• 5. Research Firms
• Marketing Research Companies at
• http//www.harcourtcollege.com/marketing/students/
  research_comp.htm

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IX. Decision Support Systems

• A. Decision Support System Defined
• a coordinated collection of data, system tools,
  and techniques with supporting software and
  hardware by which an organization gathers and
  interprets relevant information from business and
  the environment and turns it into a basis for
  making management decisions.

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IX. Decision Support Systems
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IX. Decision Support Systems

• B. Database
• a collection of information that is arranged in
  a logical manner and organized in a form that can
  be stored and processed by a computer
• C. Analytical models system
• the database management software that is used to
  analyze or provide access to the data within the
  system

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IX. Decision Support Systems

• D. User interaction system
• the software that manages the interface between
  the user and the system

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X. Hypercompetitive Market Research

• Cross functional teams continuously stay in close
  touch with lead consumers and suppliers

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XI. Global Market Research

• A. Global Information System an organized
  collection of
• telecommunications equipment,
• computer hardware and software,
• data, and
• personnel
• designed to
• capture, store, update, manipulate, analyze, and
  immediately display information about worldwide
  business activities

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XI. Global Market Research

• B. Global Market Research
• 1. Who Does the Research?
• Local Group?
• Company Team Nearby?
• Secondary vs. Primary
• 2. The Visit by Executives
• Trade Mission
• Trade Fair