Introduction to Marketing

2. Introduction to Marketing University of Chicago Marketing Management

3. Company Orientations Towards the Marketplace

4. 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

5. The Marketing Concept (Contd..)

7. Word- of- Mouth Stages in Consumer Decision Process Awareness Advertising Interest Channel Decision Product / Service Action Price Satisfaction

8. Profits Through Customer Satisfaction (One Customer)

9. Profit A Customer Generates Over Time Dollars($)

10. 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?

11. 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 > Cost of Defensive Marketing • Some companies have increased profits from 25% to 85% by reducing defections by 5%

12. 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

13. Conduct A Marketing Review (3-C Analysis) A. Analysis of CUSTOMER Trends, Needs, Perceptions, Behavior B. Assessment of COMPANY Capabilities and Current Marketing Position C. Analysis of COMPETITORS Current Position, Capabilities, Actions Opportunity Identification

14. 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

15. Implementation: The Marketing Mix (Four P’s) • Product • Price • Place • Promotion

16. 3C - 4P Framework Tactics Strategy • Product • Price • Promotion • Place • Customer • Company • Competitor

17. 3C - 4P Framework BMW Colgate IDS PDA / Infiniti Tactics Strategy Nestle Rohm&Haas Intel Dell • Product • Price • Promotion • Place • Customer • Company • Competitor Sealed-Air Barco

18. Marketing System Long Term Factors Technological Short Term Controllable Factors Product Place Price Promotion Legal Economic Socio / Cultural

19. Recasting the 3C - 4P Framework in Value Terms Creating Value Tactics Strategy • Product • Price • Place • Promotion • Customer • Company • Competitor Capturing Value Communicating Value

20. 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 2 • Competitive intensity • Declining sales • Low profits 1 Value Inflow Value Stability Value Outflow

21. 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

22. 1990 Value Migration in Coffee 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 . Coffee is Coffee Starbucks . . . Value Migration Phases Gloria Jean’s Starbucks GCA Millstone . . . Folgers Millstone Maxwell House Nestle . Folgers Chock Full O’ Nuts Value Inflow Value Stability Value Outflow

23. Replaying the Game • P&G: “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 we’ve 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 P&G’s 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.