MM2: Advanced Marketing Management

1. MM2: Advanced Marketing Management Session #1 • Today’s Agenda • Introduction& conventions • Basic marketing strategy tools • Examples of successful marketing strategies Prof. Ziv Carmon MMII Spring 2003

2. Introduction • Logistical Issues • Rules • Start on time and finish on time • Turn off mobile phones before class • Grading • Individual-based • 65% Final exam (not based on writing skills) • 10% Contribution to class via constructive participation • Group-based • 25% your Markstrat firm’s performance Prof. Ziv Carmon MMII Spring 2003

3. Course Objectives “Successful market management depends on managers’ ability to think strategically & translate that thinking into results-getting actions.” (Aaker) • Learn & practice how to think strategically • Develop a strategic perspective on marketing analysis & decisions; learn how marketing can create effective competitive advantages • Learn (by doing) how to translateideas to results-getting actions • MARKSTRAT • Learn to implement concepts & tools in a unique competitive environment offering excellent feedback • Refine your marketing decision-making abilities • Case study analyses, discussions, etc. Prof. Ziv Carmon MMII Spring 2003

4. A Central Feature of MMII:The MARKSTRAT Simulation • Generations 1,2,& now 3 used worldwide for over a decade in • University classrooms • Executive development • Company training • Research Prof. Ziv Carmon MMII Spring 2003

5. Objectives of Using MarkStrat • Put you in the “driver’s seat” & experience: • Competitive interactions • Uncertainty • Change • Have you make marketing decisions • Strategic and tactical • Marketing mix and resource allocation • Trade-offs • Work effectively in a team & cope with pressure • Experiment, make mistakes, and learn from them. Prof. Ziv Carmon MMII Spring 2003

6. How we will Operate • Customized “scenario” for this promotion • Fixed time (3.25 hours-- 2 consecutive sessions) • First output available at MBA desk on Tue., 11/3 at 1:30 PM, & at beginning of each decision thereafter • Each round team rep. shows ID & signs for output • Assigned cubicle is yours for two class sessions (only) • Second session: ‘consultant’ available to assist you (only if needed & within limits) • Will help you to ‘reason it through’ once you’ve given it your best effort • If you want to install MarkStrat on laptop DO NOT use diskettes! • Guidelines to be provided Prof. Ziv Carmon MMII Spring 2003

7. Basics of Marketing Strategy Prof. Ziv Carmon MMII Spring 2003

8. What is Strategy? • The science & art of employing political, economic, psychological & military forces … to afford maximum support to adopted policies in peace or war Merriam Webster’s Dictionary • Artof so moving or disposing troops or ships as to impose on the enemy the place & time & conditions for fighting preferred by oneself Oxford English Dictionary Prof. Ziv Carmon MMII Spring 2003

9. A Successful Marketing Strategy • A successful marketing strategy should: • Deliver value to customers • Be robust to: • Actions of our competitors • Other changes in the environment • Be one we can implement • Bottom line: Built around those competitiveadvantages of the firm that are highly valued by customers Prof. Ziv Carmon MMII Spring 2003

10. Competitive Advantages • Porter’s generic strategies: differentiation, low cost, focus. • Other examples of competitive advantages:innovation, speed, brand equity, etc. Competitive Advantage Differentiation Low Cost Broad Cost leadership Differentiation Competitive Scope Focus Narrow Prof. Ziv Carmon MMII Spring 2003

11. Source of Competitive Advantages: Firm Capabilities • Definition: • The capacity to perform an activity that involves complex coordination & cooperation between people & other resources (Schulze) • Examples • Excellent customer service • Extraordinary R&D • Key characteristics • Generate value to customers • Hard for other firms to duplicate • Rewards can be captured by the firm Prof. Ziv Carmon MMII Spring 2003

12. Mini Case Study I: Stew Leonard’s Questions: • Why is Stew Leonard’s so successful? • What are the limitations of Stew Leonard’s Strategy? Prof. Ziv Carmon MMII Spring 2003

13. Southwest Airlines Prof. Ziv Carmon MMII Spring 2003

14. Southwest Airlines Enters • Started 1971 • Limiting operations to Texas • Commuters are an important segment • Marketing of airlines just like a packaged consumer product • Discounting, clubs, services & price • Aggressive wooing of customers via a ‘great attitude’ • Passengers given the ‘experience of flying’ Prof. Ziv Carmon MMII Spring 2003

15. Southwest Today • Consistent profitability in 25 years • Only airline in industry with no fatal accident • Known as a ‘fun’ company, for customers & employees alike • Great personnel (friendly & believe in what the firm stands for/one of the best firms to work for) • Exceptionally efficient • 11.5 hours of plane utilization per day (instead of 8.6 for industry) • Quickest gate turn-around in industry • No meals, no assigned seats • Use of secondary airports • Standardization around Boeing 737 (hundreds of planes) • Youngest fleet in industry(among large players) • No connection with other airlines, no baggage transfers • Southwest model being copied world-wide Prof. Ziv Carmon MMII Spring 2003

16. Crude but Useful Rules for Marketing Strategy Prof. Ziv Carmon MMII Spring 2003

17. Rule 1: Basic Forces of Change • Competition • Experimentation: everyone seeks new ways to make money • Imitation: if you make a lot of money, or even seem as though you may, someone will copy what you do • Particular competitive advantages will generally not last • Customers • Learning: determinants of desirability change • Assimilation: preferences are perishable; expectations increase • Value will generally not last • Beware of the ‘boiling frog’ syndrome Prof. Ziv Carmon MMII Spring 2003

18. Summary of Class #1 • Introduction & Logistical Issues • Concepts • Marketing strategy • Competitive advantage • Firm capability • Marketing Strategy Tools • Porter’s generic differentiation strategies; • Listening to customers • Shaping customer preferences • Crude Marketing Strategy Rule #1: Basic Forces of Change Prof. Ziv Carmon MMII Spring 2003

19. For the Next Class • Read & come prepared to discuss the Sealed Air Case • Read Aaker Ch. 4 & 5 • Skim Further Readings (importance rank ordering: Levitt > Lehmann & Winer) • Consider starting to read the Markstrat manual Prof. Ziv Carmon MMII Spring 2003