Introduction to Marketing

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Introduction to Marketing

• University of Chicago
• Marketing Management

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Company Orientations Towards the Marketplace
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The Marketing Concept
A Customer Orientation
Backed By Integrated Marketing
Aimed at Generating Customer Satisfaction and
Repurchase As The Key To Satisfying the
Organizations Goals
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The Marketing Concept (Contd..)
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Stages in Consumer Decision Process
Word- of- Mouth
Awareness
Advertising
Interest
Channel
Decision
Product / Service
Action
Price
Satisfaction
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Profits Through Customer Satisfaction (One
Customer)
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Profit A Customer Generates Over Time
Dollars()
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Cost of Losing and Attracting Customers

• Cost of Average Sales Call 300
• Average Calls to Convert Customer 4
• Cost of New Customer 1200
• Annual Revenue from Customer 5000
• Loyal Years 2
• Profit Margin 10
• Lifetime Value 1000
• Firm is spending more on attracting new
  customers than they are worth!

• Cost of Lost Customers
• Accounts 64000
• Loss 5 for poor service 3200 accounts
• Loss in Revenue / Account 40000
• Total Revenue Loss 128 MM
• Margin 10
• Loss in Profits 12. 8 MM
• How to Increase Retention Rate?

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Cost of Losing and Attracting Customers

• Cost of attracting a new customer can be upto 5
  times the cost of keeping a current one happy
• Cost of Offensive Marketing gt Cost of Defensive
  Marketing
• Some companies have increased profits from 25
  to 85 by
• reducing defections by 5

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Developing An Effective Marketing Plan

• Conduct A Marketing Review
• Build A Marketing Strategy
• Implement Strategy Via Marketing Mix
• Evaluate The Success Of The Marketing Plan

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Conduct A Marketing Review (3-C Analysis)
B. Assessment of COMPANY Capabilities
and Current Marketing Position
A. Analysis of CUSTOMER Trends,
Needs, Perceptions, Behavior
C. Analysis of COMPETITORS Current
Position, Capabilities, Actions
Opportunity Identification
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Build A Marketing Strategy
Generic Strategies For DIFFERENTIAL ADVANTAGE
Product Differentiation Cost Leadership
Special Market Focus
Selection of TARGET MARKET and Development of
a POSITIONING STATEMENT
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Implementation The Marketing Mix (Four Ps)

• Product
• Price
• Place
• Promotion

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3C - 4P Framework
Tactics
Strategy

• Product
• Price
• Promotion
• Place

• Customer
• Company
• Competitor

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3C - 4P Framework
BMW
Colgate IDS PDA / Infiniti
Tactics
Strategy

• Product
• Price
• Promotion
• Place

Nestle RohmHaas Intel Dell

• Customer
• Company
• Competitor

Sealed-Air
Barco
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Marketing System
Long Term Factors
Technological
Short Term Controllable Factors Product Place
Price Promotion
Legal
Economic
Socio / Cultural
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Recasting the 3C - 4P Framework in Value Terms
Creating Value
Tactics
Strategy

• Product
• Price
• Place
• Promotion

• Customer
• Company
• Competitor

Capturing Value
Communicating Value
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Mapping Value Migration

• Limited competition
• High growth
• High profitability

In the outflow stage, talent, resources
customers leave at an accelerating rate

• Competitive stability
• Stable market share
• Stable margins

Market Value Revenues
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• Competitive intensity
• Declining sales
• Low profits

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Value Inflow Value Stability
Value Outflow
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Capturing Value Growth
Map Changing Customer Priorities
Identify New Business Designs
.
2001
1. 2. 3.
New Entrant
1998
.
1. 2. 3.
New Entrant
.
Old
New
.
Key elements
Assumptions
Build New Business Designs to Capture Growth
Compare Business Designs
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Value Migration in Coffee
1990
Coffee Shops Office Coffee
Gourmet Cafes
1. Quality 2. Freshness 3. Close to office
Affordable Luxury
1985
1. Price 2. Ease of purchase 3. Uniform offering
Traditional Grocery Blend
Whole bean Gourmet Coffee
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Coffee is Coffee
Starbucks
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.
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Value Migration Phases
Gloria Jeans
Starbucks
GCA Millstone
.
.
.
Folgers
Millstone
Maxwell House Nestle
.
Folgers
Chock Full O Nuts
Value Inflow Value Stability Value
Outflow
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Replaying the Game

• PG We sell coffee vs. We sell canned coffee
  of moderate quality in groceries
• The brand we have built to sell mid-tier coffee
  will not cater to gourmet coffee position as its
  made of Robusta rather than Arabica beans. So we
  need to launch a new brand that preempts the
  quality position. We may need a new design (DSD),
  but weve done radical stuff before!
• Most restaurants, food chains and institutions
  sell Coke or Pepsi (branded) but unbranded
  coffee. Once our gourmet brand is established in
  grocery stores, we may be able to move into the
  institutional market (after all, we sell to
  Wal-Mart!)
• Whole bean provider Could have built a brand by
  opening a café division. Took 7 years for
  Brothers to catch on. By opening the café
  format, regional whole bean providers could have
  built brand loyalty. Especially as they do not
  have PGs deep pockets. If the regional whole
  bean provider launched in 1991, could have built
  a national brand. By 1994, it was too late.
• Starbucks May have missed an opportunity by not
  aggressively expanding via franchising. Region by
  region rollout gave competitors / imitators time
  to preempt in certain markets. This way it would
  have conquered the retail business and could
  have focused more fully on institutional and
  grocery markets.