Ch 13 – Intro to Marketing
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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
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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
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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
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History of Marketing
Customer Relationship Era
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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
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Jet Blue Airways
Known for customer service
Watch video
February 14, 2007
New FAA Rules
Marketing Defined
(in plain English)
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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
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Product
Price
Promotion
Place
Also called the “Marketing Mix”
Marketing Process
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Find opportunities
Conduct market
research
Identify target markets
Product design
Product testing
Determine brand name
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Design packaging
Set a price
Select distribution
system
Design promotional
campaign
Build a relationship with
customers
Market Research
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Define question/determine present situation
Collect data
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Analyze research data
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Secondary = info already compiled by others
Primary = new studies you conduct yourself
turn data into useful info
Choose best solution
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Implement and follow-up to see how it worked
Target Market
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Mass marketing
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Niche marketing
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Small but profitable market segments
One-to-one marketing
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Products to please a large number of customers
Unique product for each customer
Relationship marketing
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Custom-made goods and services
Knowledge of Consumer Behavior
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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
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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
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Generate ideas
Product screening (narrow down # ideas)
Product analysis (cost estimates, sales
forecasts)
Develop prototype
Test consumer reaction
Commercialization – bring product to market
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Promote product to distributors and retailers
Product Life Cycle
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Introduction
Growth
Maturity
Decline
70-80% all new products fail!
Example of Product Development
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3M Greptile Golf Glove
3M Greptile Grip Golf Glove
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What is 3M known for?
$20 Billion global diversified corporation
Over 50,000 products
Creativity
Innovation
Technology
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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
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Geographic
Demographic
Psychographic
Benefit (what customers get out of it)
Volume (frequency of purchase)
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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
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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
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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
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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
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Find opportunities √
Conduct market
research √
Identify target market √
Product design √
Product testing √
Pick brand name √
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Design packaging √
Set a price
Select distribution
system
Design promotional
campaign
Build a relationship with
customers
Pricing Objectives
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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
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Cost plus (cost-based)
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Target costing
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Determine production costs, add in profit
Start with desired price, back out desired profit,
result is “target” cost of production
Competition-based
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At, above, or below competitor’s prices
Break-Even Analysis
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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
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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
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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
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Skimming
Penetration
Everyday low pricing
High-low pricing
Psychological
Demand-oriented pricing
Review of Marketing Process
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Find opportunities √
Conduct market
research √
Identify target market √
Product design √
Product testing √
Pick brand name √
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Design packaging √
Set a price √
Select distribution
system
Design promotional
campaign
Build a relationship with
customers
Distribution = Place in 4Ps
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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
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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
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Department store
Discount store
Supermarket
Warehouse club
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Convenience store
Category killer
Outlet store
Specialty store
Nonstore Retailing
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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
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Corporate distribution systems
Contractual distribution systems
Administered distribution systems
Supply chain management firms like Li &
Fung
Logistics: Physical flow of
materials and finished goods
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Inbound logistics
Materials handling
Outbound logistics
Reverse logistics
Third Party Logistics - UPS
Transportation
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Railroad
Trucks
Pipeline
Ships
Airplanes
Evaluate Transportation Options
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Cost
Speed
On-time dependability
Flexibility handling products
Frequency of shipments
Reach
Review of Marketing Process
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Find opportunities √
Conduct market
research √
Identify target market √
Product design √
Product testing √
Pick brand name √
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Design packaging √
Set a price √
Select distribution
system √
Design promotional
campaign
Build a relationship with
customers
Traditional Methods of Product
Promotion
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TV, Radio, Print Advertising
Personal Selling
Public Relations
Sales Promotions
Product Placement
New Strategies
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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
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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?
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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
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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
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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
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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)