Ch 13 – Intro to Marketing

1. Ch 13 – Intro to Marketing • Most people think marketing is simply advertising • Maybe at some point in history it was • Now it is a integral part of the Value Chain in creating products and services • Let’s look at how Marketing has changed over time

2. Production Era • 1700s – end of World War II • Marketing was product-focused • Produce as much as you can and it will sell • Demand outpaced supply • Henry Ford: “Customers can have any color they want, as long as it’s black.”

3. Selling Era • Post World War II - 1990s • Mad Men Era (AMC show) • Mass production caused capacity to exceed demand • Needed advertising to create demand • “Tell and sell” • Convince customers to buy your product

4. History of Marketing

5. Customer Relationship Era • 1990s – today • Learn as much as possible about your customers and do everything you can to meet or exceed their expectations • Building long-term relationships with customers by offering value and providing satisfaction

6. Customer Relationship Management • Jet Blue Airways • Known for customer service • Watch video • February 14, 2007 • New FAA Rules

7. Marketing Defined (in plain English) • Process of getting right goods or services to the right people at the right place, time, and price • Helping the buyer buy • (Which helps the seller sell)

8. 4 Ps of Marketing • Product • Price • Promotion • Place • Also called the “Marketing Mix”

9. Find opportunities Conduct market research Identify target markets Product design Product testing Determine brand name Design packaging Set a price Select distribution system Design promotional campaign Build a relationship with customers Marketing Process

10. Market Research • Define question/determine present situation • Collect data • Secondary = info already compiled by others • Primary = new studies you conduct yourself • Analyze research data • turn data into useful info • Choose best solution • Implement and follow-up to see how it worked

11. Target Market • Mass marketing • Products to please a large number of customers • Niche marketing • Small but profitable market segments • One-to-one marketing • Unique product for each customer • Relationship marketing • Custom-made goods and services

12. Knowledge of Consumer Behavior • Helps in identifying target market • Steps in Buying Decision: • 1. Recognize want/need • 2. Search for info/choices • 3. Evaluate alternatives • 4. Decide whether or not to buy • 5. Post purchase – still happy with decision?

13. Buying Decision Influenced by • Sociocultural: family, peers, social class, culture, subculture • Psychological: perception, attitudes, learning, motivation • Situational: type of purchase, social surroundings, physical surroundings, time of day, how you feel, previous experiences

14. Product Development Process • Generate ideas • Product screening (narrow down # ideas) • Product analysis (cost estimates, sales forecasts) • Develop prototype • Test consumer reaction • Commercialization – bring product to market • Promote product to distributors and retailers

15. Product Life Cycle • Introduction • Growth • Maturity • Decline • 70-80% all new products fail!

16. Example of Product Development • 3M Greptile Golf Glove

17. 3M Greptile Grip Golf Glove • What is 3M known for? • $20 Billion global diversified corporation • Over 50,000 products • Creativity • Innovation • Technology

18. What was 3M trying to do when it came up with the idea for a golf glove? • Make use of under-utilized in-house technologies • Turn them into niche markets

19. Identifying Target Market Segments • Geographic • Demographic • Psychographic • Benefit (what customers get out of it) • Volume (frequency of purchase)

20. What/who were the target markets? • Golfers who wanted a better grip with less pressure • Hot and humid areas • Physical ailments • Older golfers • Dual Income No Kids (DINKs) • Single Adults

21. What did 3M promote as the competitive advantage of its glove? • Other gloves marketed based on comfort and fit • 3M wanted to market this glove as being able to improve the user’s game

22. What problems did it encounter in introducing the glove? • Buyer resistance to thinking of 3M as a golf brand (not Titleist or Foot Joy) • Packaging problems • Visibility of text – didn’t pop • Package pillowed – wouldn’t stay closed • Consumer Testing Lab said it didn’t have the needed language on the back of the package

23. How did 3M promote the new glove? • Public Relations Event • Editors of newspapers and magazines invited to drive golf balls off pier in NYC • Seinfeld episode

24. Find opportunities √ Conduct market research √ Identify target market √ Product design √ Product testing √ Pick brand name √ Design packaging √ Set a price Select distribution system Design promotional campaign Build a relationship with customers Review of Marketing Process

25. Pricing Objectives • Achieving target profit • Building traffic (loss leaders) • Achieving greater market share • Create an image (status, exclusivity) • Further social objectives (affordable to lower income levels)

26. Pricing Strategies • Cost plus (cost-based) • Determine production costs, add in profit • Target costing • Start with desired price, back out desired profit, result is “target” cost of production • Competition-based • At, above, or below competitor’s prices

27. Break-Even Analysis • Total Costs = Total Variable Costs + Total Fixed Costs • TVC = VC/unit x # units • TFC = lump sum over certain time period • To find quantity to produce to break even • Total Revenue = Total Cost

28. Total Revenue = Price x # Units • Total Cost = TVC + TFC • At Breakeven Point: TR = TC • (PxQ) = (VCxQ) + TFC • (PxQ) – (VCxQ) = TFC • Q(P – VC) = TFC • Q = TFC/(P – VC)

29. Example • Price = $5 per unit • VC/unit = $1 • TFC = $100,000 • BEP = $100,000/($5-$1) = 25,000 units • Proof: TR = $5 x 25,000 units = $125,000 • TC = ($1x 25,000 units)+$100,000=$125,000

30. Other Pricing Strategies • Skimming • Penetration • Everyday low pricing • High-low pricing • Psychological • Demand-oriented pricing

31. Find opportunities √ Conduct market research √ Identify target market √ Product design √ Product testing √ Pick brand name √ Design packaging √ Set a price √ Select distribution system Design promotional campaign Build a relationship with customers Review of Marketing Process

32. Distribution = Place in 4Ps • Moving goods from producers to businesses (B2B) • Moving goods from businesses to consumers (B2C) • Marketing intermediaries (middlemen) make this movement happen • Channel of distribution – manufacturers to wholesalers to retailers to consumers

33. Wholesalers • Full service wholesalers – perform all distribution functions (transport, sort, sell, advertise, etc.) • Limited-function wholesalers: • Rack jobbers • Cash-and-carry wholesalers • Drop shippers

34. Types of Retailers - Stores • Department store • Discount store • Supermarket • Warehouse club • Convenience store • Category killer • Outlet store • Specialty store

35. Nonstore Retailing • Internet • Telemarketing • Vending Machines, Kiosks, Carts • Direct selling (sell at home - Tupperware) • Multilevel marketing (recruit others to sell) • Direct mail – advertisements, catalogs

36. Links between Manufacturers, Wholesalers, and Retailers • Corporate distribution systems • Contractual distribution systems • Administered distribution systems • Supply chain management firms like Li & Fung

37. Logistics: Physical flow of materials and finished goods • Inbound logistics • Materials handling • Outbound logistics • Reverse logistics • Third Party Logistics - UPS

38. Transportation • Railroad • Trucks • Pipeline • Ships • Airplanes

39. Evaluate Transportation Options • Cost • Speed • On-time dependability • Flexibility handling products • Frequency of shipments • Reach

40. Find opportunities √ Conduct market research √ Identify target market √ Product design √ Product testing √ Pick brand name √ Design packaging √ Set a price √ Select distribution system √ Design promotional campaign Build a relationship with customers Review of Marketing Process

41. Traditional Methods of Product Promotion • TV, Radio, Print Advertising • Personal Selling • Public Relations • Sales Promotions • Product Placement

42. New Strategies • How To Sell Soap • Old model of advertising is about reaching individual consumers • Future strategies should focus on getting consumers to spread the message themselves • Social network sites mean people are more connected than ever • Twitter

43. Airlines Use of Social Media • Delta searches for complaints – wants to resolve problems quickly rather than let them spread virally • YouTube video “United Breaks Guitars” • Complaining via internet sometimes gets better results because reservation agents aren’t empowered to solve problems out of the box

44. Social Media: No Brainer for B2C but B2B? • 24% B2B companies using Facebook • 36% plan to try in coming year • Looking to interact with workers who make buying decisions for their companies • Give advice, share info to show off expertise • Run special marketing contests on sites • Use social media to find out what’s being said about them

45. LinkedIn to Post Product Reviews • Companies that allow products to be reviewed will be able to include note in their ads that product has been recommended on LinkedIn • Advantage: LinkedIn recommender is “real” person; users can evaluate recommendation based on that person’s real-world experience • Companies would have to set up company profile pages and add products first

46. Target Marketing • Targeted ads: Google collects data about websites people visit and uses it to show them ads – tracking people online to profit from their actions • Contextual targeting – selling ads based only on the name or content of a page • Behavioral targeting – identifies specific users and their interests

47. Lululemon’s Promotional Strategy • High end women’s athletic wear • Does not use traditional strategy of hiring sports celebrities to model its outfits • Spends almost nothing on advertising beyond occasional print ads in yoga and running magazines • Recruits fitness instructors to wear Lululemon clothes and hold classes in Lululemon stores • Objective = promote good health (not make a profit)