Introduction to Marketing University of Chicago Marketing Management

Company Orientations Towards the Marketplace

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

The Marketing Concept (Contd..)

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

Profits Through Customer Satisfaction (One Customer)

Profit A Customer Generates Over Time Dollars($)

Cost of Losing and Attracting Customers Cost of Lost Customers # Accounts = Loss = 5% for poor service = 3200 accounts Loss in Revenue / Account = $40000 Total Revenue Loss = $ 128 MM Margin = 10% Loss in Profits = $ MM How to Increase Retention Rate? 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 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%

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

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

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

Implementation: The Marketing Mix (Four Ps) Product Price Place Promotion

3C - 4P Framework Customer Company Competitor Product Price Promotion Place

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

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

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

Mapping Value Migration Value Inflow Value Stability Value Outflow Market Value Revenues 2 1 Limited competition High growth High profitability Competitive stability Stable market share Stable margins Competitive intensity Declining sales Low profits In the outflow stage, talent, resources & customers leave at an accelerating rate

Capturing Value Growth Map Changing Customer Priorities.. New Entrant Identify New Business Designs Old New Key elements Assumptions Compare Business Designs.. Build New Business Designs to Capture Growth

Value Migration in Coffee Coffee Shops & Office Coffee Traditional Grocery Blend Gourmet Cafes Whole bean Gourmet Coffee 1. Price 2. Ease of purchase 3. Uniform offering 1. Quality 2. Freshness 3. Close to office Coffee is Coffee Affordable Luxury... Folgers Maxwell House Nestle. Chock Full O Nuts. Gloria Jeans. Starbucks.. GCA Millstone Value Inflow Value Stability Value Outflow Starbucks Millstone Folgers Value Migration Phases

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 weve 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&Gs 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.