Marketing Management Thinking Copyright ©1997 Harcourt Brace & Company. All Rights Reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt Brace & Company, 6277 Sea Harbor Drive, Orlando, Florida

Definition of marketing management Marketing management is the management of the innovation and imitation processes that firms use to identify and increase customer satisfaction and reduce costs faster than their rivals. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

The Study of Marketing Management n The study of the innovative and imitative ways that firms identify and satisfy customers. n Ralph Starr Butler’s “Marketing Management” Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

What-To-Do Lists from the First Marketing Management Textbook How to Study the Market Who are the people that make up the market? Consideration of those who buy and those who influence the buyer. Men, women, or children? Rich or poor? Occupations. Environment-city, town, or country dwellers. Where do they live? Is market international, national, sectional, or local? What limits it? Can it be extended? Climatic influence. When do they buy? Buying seasons. Extending the seasons. When do buyers enter the market? Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

What-To-Do Lists from the First Marketing Management Textbook (Continued) How to Study the Market How do they buy? Is it hard or easy to change buying habits? Do they buy from dealers or from manufacturers? Do they expect credit? Do they buy in large or small quantities? How much will they buy? Total consumption of all competing products. Is the market growing or shrinking? Total consumption in restricted territory. Per capita consumption. Comparison of consumption and production. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

What-To-Do Lists from the First Marketing Management Textbook (Continued) How to Study the Market From whom do they buy? Total number of competitors. Resources of each. Relative strength of competitors. Prosperity and goodwill of each. Marketing methods of competitors. Sales channels. Prices and profits. Transportation problems. Influence on size of market. Influence on prices, profits, and other selling factors. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

What-To-Do Lists from the First Marketing Management Textbook (Continued) Steps in Reaching the Market 1. Selection of trade channels. 2. Determination of sales policies. Advertising. Credit. Price maintenance. Returned goods. Guarantees. Treatment of customers. 3. Charting the cost of marketing. Complete budget of estimated expenditures, sales and profits. 4. Organization of salesmen and of advertising. Definite schedules of all forms of selling activity. 5. Coordinating the salesmanship and advertising. 6. Getting distribution and cooperating with dealers. 7. Plan for detailed records of actual expenditure, sales, and profits. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

The Evolution of Thought n textbooks by McCarthy and Kotler write about concepts and methods. n Three concepts are universally presented: n 1. The marketing concept n 2. The synergy concept n 3. The product life-cycle concept Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

The Marketing Concept n The firms that flourish focus on identifying and satisfying customer needs. n Competition forces sellers to focus on satisfying the customer. n Firms that market innovations create and shape customer demand and satisfaction. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

The Synergy Concept n The firm that creates marketing and management tactics that fit together well and coordinates their implementation in the right order will do much better than the firm whose tactics and implementation are confused and disjointed. n Total Quality Management combines the marketing and synergy concepts. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Types of Synergy n Served market overlap n Product/service positioning ‘complementarities’ n Implementation process coordination Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

The Product Life-cycle n Like a living organism, a product goes through a birth stage, growth stage, mature stage and decline stage. n Firms should emphasize different marketing strategies and tactics at different stages. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Redirect focus and promotion Invest in expanding production Build inventory Expand distributor network Train expanded sales force Institute marketing controls Invest heavily in advertising Target best prospect: innovators and enthusiasts Use most loyal distributors Use free samples Public demonstrations and trade shows Publicity and endorsements Bed down quality control Make final product and service modifications Use specialist media and catalogs Freeze investment in plant Productivity review Special trade promotions to keep channels happy Focused attacks on vulnerable competitors Long-term price reduction or at least a short-term price promotion Keep plant at maximum capacity and subcontract excess Strongly defend home- market niches Prune product lines Emphasize gross contribution rather than market share and sales volume Review logistics: prune costs Reduce pioneering sales force effort, more telemarketing More trade than consume promotion Introduce flankers, private labels, generics Reinvest in market research and R&D Use promotions to increase heavy-user loyalty Cut low gross margin products from the line Withdraw from channels in order of their unprofitability Freeze R&D and product modifications Freeze advertising and promotions Attempt to maintain price to the end Buy back remaining stock and redistribute Maintain spare parts and service Consider divesting while it is still a going concern Rapid expansion of distributors Product line expansion Niche marketing Continued heavy promotion Sales force incentives and management Encourage referrals Search for new sources of supply Need to balance supply and demand Stock out and back order damage control Product Life-Cycle Stages and Marketing Tactics Sales Launch Takeoff Rapid Growth Shakeout Maturity Decline Time Product Life-Cycle Stages and Marketing Tactics Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

New Thinking in Marketing: The Delta Paradigm n How and why is the market changing? n What is driving the change? n Markets are becoming hypercompetitive: when several sellers are aggressively innovating new products, distribution channels and cost-cutting processes, and quickly imitating successful innovations. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Three Basic Competitive Drives n Drive to improve customer satisfaction through increasing quality and reducing price. n Drive to reduce costs by increasing process efficiency without reducing output quality. n Drive to improve the speed and adaptability of key processes. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Macro Competitive Rationality Micro Competitive Rationality Buyers’ preferences and wants are always being changed by changes in supply. The variation in consumer demand is constantly changing Sellers learn directly and by observing other sellers how to serve customers more effectively Sellers with more acute and less biased perceptions of how the market is changing are more competitive. The variation in the supply offering is constantly changing Supply will shift to serve the demand of the most profitable market segments The economic process changes the economic structure. The economic structure changes the social structure. Sellers who can implement their innovations and imitations faster are more competitive. Markets are always in disequilibrium. Competition increases when supply exceeds demand. Sellers who possess an insatiable self- improvement drive are more competitive. Effective product and process innovations are quickly imitated and improved Sellers are driven by competition to experiment with new, innovative ways of serving customers The Macro and Micro Theories of Competitive Rationality Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Buyers’ preferences and wants are always being changed by changes in supply Suppliers’ products and processes are always being changed by changes in demand The three competitive rationality drives accelerate the flow The variation in consumer offering is constantly changing The variation in supply offering is constantly changing The Perpetual Motion Machine That Increases the Efficiency of Free Markets Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Competitive Rationality n The competitive thinking and marketing decision making of a firm in a competitive market. n Great marketing entrepreneurs are driven, possess great alertness and insight, and introduce new ways of doing things quickly. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

General Theory of Competitive Rationality n Variations in the response rate of buyers and sellers to changes in supply and demand create opportunities that are exploited by the marketing entrepreneur. n Changes in economic processes drive changes in the economic and socio- political structure. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Common Elements in the Marketing Skills of Great Entrepreneurs They possess unique environmental insight, which they use to spot opportunities that others overlook or view as problems. They develop new marketing strategies that draw on their unique insights. They view the status quo and conventional wisdom as something to be challenged. They take risks that others, lacking their vision, consider foolish. They live in fear of being preempted in the market. They are fiercely competitive. They think through the implications of any proposed strategy, screening it against their knowledge of how the marketplace functions. They identify and solve problems that others do not even recognize Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Common Elements in the Marketing Skills of Great Entrepreneurs (Continued) They are meticulous about details and are always in search of new competitive advantages in quality and cost reduction, however small. They lead from the front, executing their management strategies enthusiastically and autocratically. They maintain close information control when they delegate. They drive themselves and their subordinates. They are prepared to adapt their strategies quickly and to keep adapting them until they work. They persevere long after others have given up. They have clear visions of what they want to achieve next. They can see further down the road than the average manager can see Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.

Mental Model of the Market n How the development team collectively “thinks” about the market. How it frames and organizes its thinking. How the “spin” is put on new events and facts. n How market research should scan the market and present intelligence to team. n Used as the basis for assessing the fit between the organization and its environment. Copyright ©1997 Harcourt Brace & Company. All Rights Reserved.