Marketing 5210

Session 1


 Tony Palcheck
 Lake Forest Graduate School of Management
 August 23, 2010

1-1
 Marketing 5210
Session 1 - Agenda

1. Introductions
2. Course Description
3. The Kotler bible
4. Voorn text
5. Grading
6. Expectations
7. What is Marketing?
8. Developing Marketing Strategies and Plans

1-2
 Marketing 5210
Course Description – Week by Week
Week #
 Topic
1. Introduction to Marketing
2. Market Research and Analysis
• Customer research
• Competitor research
3. Marketing Strategy
4. Product Positioning and Differentiation
5. Product and Service Strategy
6. Channel and Distribution Strategy
7. Integrated Marketing Communications
• Advertising, PR, Direct Mail, Sponsorship, Events
8. Pricing Strategy
9. Global Marketing and Ethics – presentation preparation
10.Presentations

1-3
 Marketing 5210
The Marketing Pyramid

Execution

Marketing Strategy and Tactics

Creating Communicating Delivering

Value (Weeks 4,5,8) Value (Week 7) Value (Week 6)
Product Positioning Integrated Marketing Channel and
Differentiation Communications Distribution Strategy
Product and Service Strategy Advertising, PR, Direct
Pricing Strategy Mail, Sponsorships, Events

Market Research and Analysis (Weeks 1+2)

Market Structure and Customer research Competitor research
Landscape Analysis
1-4
 The Kotler Bible, the additional
readings and Voorn Text

1. The Kotler Book is THE best marketing book out there

2. It IS long and takes time to read
3. While I won’t cover everything in the book, I will generally follow
it
4. Some of it is repetitive
5. Voorn’s information will help you structure your marketing plan
6. The readings are a bit old, but the information is “timeless”

1-5
 Assignments Due
Week Readings Papers Due
Kotler chapter Articles Case Studies

1 1,2 Several ----

2 3,4,5 (skim 6, 11) Several Eastman Kodak – 1 paragraph Connections

Funtime Film prospectus
3 8 (skim 6,7) Several Colgate - Palmolive 1 page prospectus of
Marketing Plan
4 9,10 Several Land Rover Land Rover case analysis

5 12,13 Several Black and Decker

6 15 (skim 16) Several Autobytel Autobytel case analysis

7 17,18 (skim 19) Several Heineken

8 14 Several The pricing predicament Connections paper

9 21,22 (skim20) Several -----

10 ---- ----- 30 page Marketing plan

1-6
 The Marketing Plan Assignment
Schedule your time wisely!
Week TASK TASK

Week 1 FORM TEAMS

BRAINSTORMING IDEAS FOR A PRODUCT OR SERVICE

Week 2 FINALIZE PRODUCT/SERVICE SELECTION (WITH BEGIN PROJECT PLANNING AND DIVISION OF LABOR
INSTRUCTOR APPROVAL)

Week 3 CONDUCT SECONDARY RESEARCH ASSESS THE INDUSTRY/MARKET AND ENVIRONMENTAL

FACTORS

Week 4 CONSTRUCT SURVEY IDENTIFY CUSTOMER SEGMENTS AND ANALYZE

CONDUCT PRIMARY RESEARCH CONSUMER BEHAVIOR

Week 5 CONDUCT PRIMARY RESEARCH SELECT SEGMENTS TO BE TARGETED

ANALYZE SURVEY RESULTS DEVELOP POSITIONING STRATEGY
ANALYZE THE COMPETITION
Week 6 FORMULATE PROJECT OBJECTIVES FINALIZE POSITIONING STATEMENT
DETERMINE YOUR COMPETITIVE ADVANTAGE & VALUE DEVELOP POSITIONING MAPS
PROPOSITION
Week 7 DEVELOP FOR PRODUCT AND CHANNEL STRATEGIES AND
ACTION PLANS

Week 8 DEVELOP INTEGRATED COMMUNICATIONS AND PRICING
STRATEGIES AND ACTION PLANS
Week 9 DEVELOP FINANCIAL STATEMENTS
DETERMINE CONTROLS AND CONTINGENCIES
Week 10 PRESENT PLAN TO PANEL OF MARKETING EXPERTS
FOR SERVICES, ALSO DEVELOP STRATEGIES AND ACTION
PLANS FOR PEOPLE, PROCESSES, AND THE PHYSICAL
ENVIRONMENT
FINALIZE PRESENTATION AND PLAN DOCUMENT (WHICH
MUST INCLUDE DETAILED NARRATIVES DESCRIBING &
SUPPORTING YOUR MARKETING MIX ACTION PLANS)

1-7
 Grading
% of Grade Assignment to be Graded

20% Class Participation

30% Case Studies – 2 at 15% each

15% Connections Assignment

35% Marketing Plan

Letter Grade – Numeric Range Letter Grade – Numeric Range

A 100 – 95.0 C < 80.0 – 77.0
A- < 95.0 – 92.0 C- < 77.0 – 74.0
B+ < 92.0 – 89.0 D+ < 74.0 – 71.0
B < 89.0 – 86.0 D < 71.0 – 68.0
B- < 86.0 – 83.0 D- < 68.0- 65.0
C+ < 83.0 – 80.0 F < 65.0 – 0

1-8
 Expectations

1. The course is hard

2. There is a ton of reading
3. I know you have jobs, families, lives
4. You must contribute to your team and the class
5. You need to be in class to do that and earn your grade

1-9
 To pass this course
 To pass this course, you must be able to:


1. Understand marketing in a global environment and its integrative role in

organizations.
2. Assess the marketing environment as a foundation for marketing strategy
development.
3. Construct an effective marketing strategy based on competitive advantages
and sound market positioning.
4. Develop tactical marketing mix components that drive an overall marketing
program, including integrated, marketing communications.
5. Identify, evaluate, and formulate solutions to marketing problems utilizing
critical thinking skills.
6. Integrate marketing decisions into a real-world marketing plan for a product
or service.
7.
1. 1-10
 Why does a Business Exist…
…and where does Marketing Fit in?

Minus

Times

Divided by
Times

This is why businesses exist!

1-11
 Why does a Business Exist…
…and where does Marketing Fit in?
These numbers Are driven by these marketing decisions

Minus

Times

Times

1-12
 Expectations
1. Why are you here?
• Why did you want to get your MBA?
• Why did you choose Lake Forest?
2. What do you want out of the class?
• A good grade
• Learning
3. What could I do to make this the best course you have
taken at Lake Forest?
4. What could I do to ensure you are getting the best value
for your investment of time and money?

1-13
 Outline
1. What is Marketing?
2. What gets marketed?
3. Marketing is a core part of any business
– All functions in a business
– All products
4. Strategy development
– Strategic Marketing framework
– The Marketing plan
5. Understanding the macro environment
6. Assessment tools
7. The 3Cs and 4 Ps
1-14
 The Point of Marketing?


• “The aim of marketing is to know and understand the customer so well, the product or service fits him
and sells itself.” – Peter Drucker
•
• “We’re obviously going to spend a lot in marketing because we think the product sells itself” – Jim
Allchin, Microsoft
•
• “In the factory we make cosmetics; in the drugstore we sell hope” - Charles Revlon
•
• “The point of marketing, is to make selling unnecessary” - unknown
•
• “The most important thing we do is market the product. We've come around to saying that Nike is a
marketing-oriented company, and the product is our most important marketing tool” - Phil Knight,
CEO Nike
•
• “Yes, I sell people things they don't need. I can't, however, sell them something they don't want.” -
John O’Toole
•
• “Selling focuses on the needs of the seller; marketing focuses on the needs of the buyer.” -
Theodore Levitt, Harvard
•
• “Marketing is far too important to leave to the marketing department” - David Packard, HP
•
• “The purpose of marketing is to sell more stuff to more people more often for more money in order to
make more profits” - Sergio Zyman, Coca Cola 1-15
•
 What is Marketing?
1. “Marketing is the process of planning and executing the conception,
pricing, promotion and distribution of ideas, goods and services
to create exchanges that satisfy individual and organization
objectives.” - American Marketing Association
2. “Marketing is the art of creating, satisfying (and retaining) customers
at a profit.” –Peter Drucker
3. “Marketing views the entire business process as consisting of a tightly
integrated effort to discover, create, arouse and satisfy customer
needs.” -Ted Levitt in “Marketing Myopia”
4. “The marketing concept holds that the key to achieving organizational
goals consists in determining the needs and wants of target
markets and delivering the desired satisfactions more effectively
and efficiently than competitors.” – Phil Kotler


1-16
 5 Core Business Processes
…that all require marketing support
Core Process Description Marketing Job Title
Market Sensing Gather and disseminate marketing Market research
intelligence

Product Development R&D, engineering, product Product management,

management to launch a new Market management,
product Promotions
Customer acquisition Defining the target and prospecting Product marketing,
for customers Telemarketing, Sales

Customer relationship Developing the relationships to Sales

management understand their needs and sell them
products
Fulfillment management The exchange of product for money Customer service, Market
research

1-17
 What Gets Marketed?

• Goods •Places
• Services •Properties
• Events •Organizations
• Experiences •Ideas
• People •Information


Is fast food a product or a service?

1-18
 5 types of Needs
Type of Need Description Example

Stated What we say Inexpensive car

Real What we mean Low operating costs, not

just initial cost

Unstated What we expect Great service, in addition to

low price

Delight What the seller can do Throw in the warranty and

above and beyond navigation system

Secret How we want to be Smart, savvy customer

perceived

How can a marketing person pick up on all those needs? 1-19

The Evolution of Marketing in an Organization

The continuum of organization philosophies on marketing

Production Product Holistic

Selling Marketing
Marketing

•Volume oriented •Feature/ •Push mentality •Customer centric •Everyone in the

•Low cost performance •Sell what you view company is involved
•Mass distribution oriented can •Some in marketing
•Better mousetrap •Shorter term customization •Customer dialogues
mentality thinking •Knowledge of •Embraces channel
competitors partners
•Win-win-win

Where is your company today?

1-20
The Strategy Development Process

Business
Mission External and
Internal
environment
Feedback assessment
& Control

Goal
formulation

Implementation

Strategy
Program formulation
formulation

1-21
 Strategic Marketing Framework
Research the Market Environment Economic, Demographic, Psychographic,
Social, Regulatory, Political, Growth rate,
Market Trends

Consumers
The 3 C’s, or maybe 4 Customers External research
Competitors
SWOT Company Internal research

S Segmentation
T Targeting Strategic Decisions
P Positioning i.e. What to do?

Product
Price Tactical Decisions
Place i.e. How to do it?
The 4 P’s
Promotion

People
Process
Service operations have 3 more P’s
Physical Environment 1-22
 5 Elements of the Marketing Plan
• Situational analysis
– Demographics - Customer research
– Political - Competitor analysis
– Social - Market research
–
• Strategy formulation
– Segments to pursue - Positioning of product
– Product differentiation - Anticipate competitive response
– 4P’s in principle for each target market
–
• Planning, Organizing, Budgeting
– Funding issues - Selling the story to management
– Staffing issues - 4P’s in great detail
–
• Marketing Implementation
– Mobilizing resources - Coordinating channel members
– Engaging customers - Coordinating ads, IMC, etc.
–
• Assessing Performance
– Feedback from customers - Fine-tuning
– Feedback from channels - Innovating
– Internal situation 1-23
- Address questions of effectiveness and efficiency
 Judging Your Marketing Plan in
Week 10
Minimal Emerging Competent Exemplary
• Environmental
– Macro
– SWOT
– Competitors
– Market Position
• Market Research
– Primary
– Secondary
• Strategy
– Objectives
– Segmentation
– Targeting
– Positioning
– Sustainability
• Tactics (4Ps)
– Product/Service
– Channels
– Promotion
– Pricing
– Alignment
– Specificity
• Financials
• Control and Contingencies
1-24
 The Macro Environment
External Consumers Companies
• The digital age – •Information and •Better market
information technology give them research tools
everywhere more buying power
and greater product •More communications
• The global market intelligence channels
• Deregulation, •Multiple ways to buy •More distribution
privatization outlets
•Incredible array of
• Intense Competition available good and •Specialization
• Product and service services •Greater talent
convergence – digital•Have the means to
and other •Ability to customize
communicate back products and
• Clutter and saturation - and share information solutions
advertising and with other consumers
marketing •
•
• Shifts in retailing •
•
• 1-25
 Define a Market, not just a
Product
Company Product Definition Market Definition (serving a
customer need)
Missouri Pacific Railroad People and goods mover
Railroad
Xerox Copying Equipment Improve office productivity

Standard Oil Sell gas Supply energy

Columbia Pictures Make Movies Market entertainment

Encyclopedia Sell Encyclopedias Distribute information

Brittanica

YOUR COMPANY ?? ??

1-26
 Product Issues
The 3 C’s
Customer

Positioning =
Differentiation
+ Segmentation

Company Competitors

Degree of Customization
Standardized Cost and Complexity Customized

Breadth of product line

Few Cost and Complexity Many

Constant conflict 1-27

 Tools for Assessing Growth Opportunities

Planning for Growth

Current Products New Products
Current Market-penetration Product
Market strategy development
strategy
New Market Diversification
Markets development strategy
strategy

Assessing the Attractiveness of Assessing a

an Opportunity threat
Probability of Success Probability of Occurrence
Attractiveness of Market

Low High Low High

High High
Seriousness

Low Low
1-28
 Market Selection – Segmentation,
Targeting, Positioning

Some basic questions to ask

What markets should we serve?
 Most important decision
 Define your strengths and weaknesses vs. environment and
competitors


What form should the product take?

 How value-added? Do we compete on price?
 May compete with customers or upset suppliers


What should the product do for the user?

 What is the cluster of benefits
 Differential advantage


For whom is the product most important?

 Would like to select that segment
 Market research is necessary
1-29
 The 4 Ps

“Marketing is satisfying the needs of the customers

by means of the product and the whole cluster of
things associated with creating, delivering, and
finally consuming it.” - Theodore Levitt, Harvard


1-30
 The 4 P’s
(the whole cluster of things)
Price Place Promotion
Product •List •Channels •Sales
•Discounts, •Coverage •Advertising
Decisions to be

•Variety
•Quality coupons, •Locations •PR
rebates •Inventory •Direct Marketing
•Design •Payment period
•Features •Distribution •Sponsorships
•Credit Terms
made

•Brand name
•Packaging
•Sizes
•Services
•Warranties
that make them

•Product •Finance •Traffic •Advertising

management •Credit •Warehousing •PR
Departments

•Design, R&D •Strategy and •Sales

•Engineering Planning •Distributors
•Manufacturing •Technical service
•Logistics
•Supply chain
•QA

The 4P’s do not exist in isolation, they are highly interdependent 1-31
 Generic Strategies

Your company had better be able to say either

1.They have cost leadership
2.They have performance (value) leadership
3.They are the best in serving a specific segment of the
market…

…or you may need to start looking for

your next company

1-32
 Distribution Considerations

Indirect Direct

Exclusive Intensive
Selective

• Channel structure depends on:

– the nature of the goods in question
– the buying process used to acquire them
– the firm’s strategy and internal capabilities
•

• Logistics, physical distribution are other important consideration

•

• The channel decision is often the longest term decision you will make
in marketing strategy
• 1-33
 Pricing Issues
 Pricing Philosophies
Scorched
Skim Earth

Methods used to set prices:

1.Cost-based - simplest method, but can undermine profitability
2.Competition-based- may represent lower limit even more than cost-based,
ignores product differentiation
3.Value-based - most sophisticated method, requires deep customer knowledge

Pricing itself conveys a message about the product

1-34
 Price vs. Value
Understanding the real costs
 Purchase Price
 +
 Time Lost in Transacting
 +
 Time Lost in Correcting Errors
 +
 Quality Variation
 +
 Returns, Rejections
 +
 Risk of Non-performance
 +
 Cost of Ownership, Maintenance, Tech Service Needs


 = Total Cost


 Purchase price is only one component, not the whole enchilada!



1-35
 Promotion Tactics
Push vs. Pull



Push Pull
• Trade promotion, spiffs •Advertisements
• Deals •Demand creation
• Special commissions for •Focus on customer’s customer
distributors •Long term channel equity
• Short term focus •Value-oriented
• Price-oriented •Profit-oriented
• Volume-oriented

•Sometimes tactics are driven by short-term problems/needs.

•Industrial marketers tend to rely too much on push
•sales incentives are built around it
•short term focus is a problem generally
•

1-36
 Communication Alternatives
HIGH •National Account Management
•
•Personal Selling with demo center
•
•Trade shows
•
•Industrial Stores
•
COST

•Telemarketing with catalog

•
•Telemarketing
•
•Catalog selling
•
•Direct mail
•
•Media ads in trade publications
LOW

1-37
Trends


 Trends

1-38
 Top 10 Marketing Trends
• Maturity of markets in all developed countries
• Slower growth, rising productivity  overcapacity in many industries
• Must create demand growth, not just manage it as in the past
• Must develop products and services customers didn’t realize they needed and now can’t do
without
• Parity products, parity price – too many choices!
• Must find new ways continually to augment and enhance
• Uniqueness is critical, otherwise you just get back to parity
• Customization by customer
• Rising customer expectations
• Time pressure, time poverty
• We sell to people not just companies
• Lower prices are almost always expected
• Decline in marketing productivity
• Sales forces are getting more important in creating, sustaining and communicating value. Also
getting more costly
• Purchasing staffs have been reduced. Customers are harder to reach
• Must be easy to deal with. Reduction of vendor bases
• 500 TV channels coming, special interest magazines, DVR’s as filter
• Self-sufficiency fallacy (vertical integration in mainly a thing of the past)
• Focus on core competencies and differential advantages; things done uniquely well
• Farm out everything else, some fairly critical, but not central to mission
• Switch fixed costs to variable wherever possible
• More demands are being put on vendors, but less time to see them 1-39
 Top 10 Marketing Trends
• Market fragmentation
• Segments of one, not just large homogeneous clusters
• Requires “mass customization” response
• Customer Relationship Management is critical
• Sales people must become consultants, value-merchants
• Acceleration of technology
• Shorter product life cycles, shorter lead times
• Power shift to retailers and to others closest to the actual customer
• Helps competitors get better, faster
• General speed-up of systems
• Rapid loss of competitive advantage
• Third world suppliers –often, patents are irrelevant
• Info is freely available and cheaper to access
• Core competencies become obsolete - must find new ones continually
• Increasing Government regulation
• Affects all developed countries
• Industrialization as nuisance
• Globalization
• Standardization of quality, specs, ISO-9000, etc.
• Standardization of pricing within limits
• Fast info flow
•
1-40
 Changes in the Retail Environment

• Wholesalers are an endangered species as retailers partner directly with manufacturers

•
• Electronic channels continue to evolve
•
• “Share of mind” competition continues to heat up:
 Down Up
 Network TV Cable TV
 Movies Videos
 Newspapers Computer services
 Supermarkets Alternative formats


• Private label will continue to grow, as the store becomes a brand to a great extent. Era of
expansion is ending – this is the era of market share battles.


• Conventional retail formats are losing share to new ones: Category killers, supercenters,
electronic shopping


• Key is to operate on lower gross margins, lower operating expenses, less inventory, and
faster turns.


• Boundaryless supply chains – from production line to checkout line are evolving, driven in
large part by the Internet.


• Consumers are demanding more choice, consistency, convenience, and service for less
time, money, effort, and risk

1-41
 Women wield market power

• Consumers spend $3.5 Trillion annually and women control or influence:

 83% of all purchase decisions
 90% of new vehicle purchases
 46% of men’s wear
 66% of home computers
 82% of supermarket purchases
 70% of appliance choices
•
• Also keep in mind:
 Women handle 75% of family finances
 Home ownership by women has increased 25% in fifteen years
 Women represent 40% of business travelers, up from 1% in 1970
 43% of persons with assets over $500,000 are women
 Less than 25% of new mothers quit working
 Women own 53% of all stock



 Source: N.W. Ayers

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 To Summarize
• Marketing, done effectively, is more of an operating philosophy of
business than merely a functional area and could/should touch
each other functional area.
• The elements of the marketing plan include
– Situational analysis
– Strategy formulation
– Planning, Organizing, Budgeting
– Marketing Implementation
– Assessing Performance
• The rate of change in the world is accelerating on every dimension,
and it is critical that our approach to customers changes as well

1-43
 Summary
Strategic Marketing Framework 5 Elements of the Marketing Plan

The 3 C’s The 4 P’s

1-44
 Assignments Due
Week Readings Papers Due
Kotler chapter Articles Case Studies

1 1,2 Several ----

2 3,4,5 (skim 6, 11) Several Eastman Kodak – 1 paragraph Connections

Funtime Film prospectus
3 8 (skim 6,7) Several Colgate - Palmolive 1 page prospectus of
Marketing Plan
4 9,10 Several Land Rover Land Rover case analysis

5 12,13 Several Black and Decker

6 15 (skim 16) Several Autobytel Autobytel case analysis

7 17,18 (skim 19) Several Heineken

8 14 Several The pricing predicament Connections paper

9 21,22 (skim20) Several -----

10 ---- ----- 30 page Marketing plan

1-45