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

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.”

Selling Era Post World War II s 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

History of Marketing

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

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

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)

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

Marketing Process 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

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

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

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?

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

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

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

Example of Product Development 3M Greptile Golf Glove

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

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

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

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

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

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

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

Review of Marketing Process 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

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)

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

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

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)

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

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

Review of Marketing Process 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

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

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

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

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

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

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

Transportation Railroad Trucks Pipeline Ships Airplanes

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

Review of Marketing Process 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

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

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

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

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

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

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

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)