MGT 6450 Marketing Web Main Menu Syllabus Schedule & Outline Class News Overview of marketing Small group formation & discussion of products/services via product life cycle Next week: market segmentation

Marketing News Generational Marketing Social Marketing News Advertising Age AMA Marketing News Direct Marketing News Marketing Today

“The societal marketing concept holds that the organization's task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors, in a way that preserves or enhances the consumer's and the society's well-being. “ "Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create and maintain relationships that will satisfy individual and organizational objectives."

How is marketing done in your organization?

How is marketing currently conducted in your organization? What role does a marketing department have in helping form organizational strategy; how well connected are they with other departments and functions in the organization; how is market information gathered, analyzed and used? What are the “change drivers” that have propelled marketing to this position in organizations? Why is strategic marketing so crucial in today's marketplace? In your organization, where does marketing fit with strategic planning? How aware are employees of the marketing concept and efforts of the marketing department (or whomever does it)? Examine your organization's mission statement and define it from product/service perspective as well as marketing perspective (who are the customers & what needs are you committed to satisfying?) Using the Product Life Cycle, place your product/service line along the continuum (Portfolio methods)Portfolio methods Discussion Questions

Less expensive, more widely available communications, transactions, information, and production technologies such as: Internet based communication and commerce Data mining Pattern recognition algorithms (neural networks) Computer integrated design Rapid prototyping Simulation testing of designs and prototypes Real time data tracking Nanotechnology Flexible manufacturing technology Enterprise wide software Culturally, ethnically diverse workforce that is more mobile: Political and economic conditions creating more opportunities for markets and supplies worldwide Aging workforce worldwide Language and culture differences Competitive environment: More informed customers More evenly distributed technological capabilities among competitors More closely linked suppliers Easier entry for new competitors World wide market for supplies and workers Business processes: More knowledge about customer buying patterns Improved forecasting ability Improved production scheduling and tracking More rapid production process design Integration: Coordination of geographically dispersed operations Coordination of culturally diverse workforce Coordination of logistics and information with dispersed networks of customer and suppliers Workforce: More use of temporary workers Competition for skilled and knowledge workers Management across international cultures Difficulty in molding organizational cultures Change DriversEffects of Change Drivers

75% of executive teams do not have a clear customer propositions (idea of the mix that appeals to the target market) 85% of management teams spend less than one hour per month discussing strategy 60% of organizations don't link strategy and budgeting 92% of organizations don't report on strategic lead indicators Less than 5% of an organization's workforce understands its strategy Only 51% of senior managers, 21% of middle managers, and 7% of line employees have personal goals linked with strategy Organizations find that up to 25% of strategy measures change each year Tangible book value represented only 62% of industrial organization's market value in 1982; in 1992 it was 38%, and 10-15% in 2000 The failure rate of strategies is between 70-90%, mainly due to poor implementation What’s gone wrong with strategy?

Information from Market Research SWOT or TOWS Analysis for Strategy

Eras of Marketing Production Era ( ): “a good product sells itself”; offer more products! Build it and they will come! [problem: unsold inventory]. First courses with “marketing” title. Focus on distribution. Sales Era ( s): Marketing principles. Good advertising and sales will overcome consumer resistance” (Brand image differentiation); Marketing associations & journals [problem: broad advertising not cost-effective] Marketing Era (1950s-1980s): Mass market boom! Use of behavioral and quantitative sciences. Customer is King! Find (create) a need and fill it; (market segmentation & targeting) satisfy needs! [problem: too short term & costly] Relationship/Partnering Era (1990-): Short term financial focus, downsizing, globalization, reengineering trends. Publish or perish pressure on research. Concern, trust, and investment in collaborative relationships with long term customers and competitors (e.g., Saturn owner parties, Sam’s Club memberships, etc.). Specialized interest areas; sophisticated multivariate segmentation; wide application [Problem: still short term, fragmented research, customer manipulation] Next ? Pre-Marketing Era ( ): “I got it, you want it?”

Pre-Marketing Era ( ) “I got it, you want it?” Cottage industries making narrow specialties with little variation Often family businesses Generally for local trade Word of mouth promotion Example: China 1986 basket and wood shipping containers

Production Era ( ): [problem: unsold inventory]... “A good product sells itself” (unsold inventory) offer more products! Focus on distribution First courses with “marketing” title

Sales Era ( s) Marketing principles Good advertising and sales will overcome consumer resistance” Brand image differentiation Marketing associations & journals problem: broad advertising not cost- effective

Marketing Era (1950s-1980s) Mass market boom! Use of behavioral and quantitative sciences Customer is King! Find (create) a need and fill it problem: too short term & costly market segmentation & targeting, satisfy needs! (high sales, low prices)

Relationship/Partnering Era (1990-) Short term financial focus, downsizing, globalization, reengineering trends. Concern, trust, and investment in collaborative relationships with long term customers and competitors (e.g., Saturn owner parties, Sam’s Club memberships, etc.). Publish or perish pressure on research. Specialized interest areas; sophisticated multivariate segmentation; wide application Problem: still short term, fragmented research, customer manipulation Hummer Party Sam’s Club

Social Media Marketing (2005-) Widespread availability of technology enables lower cost channels Online interactivity provides for promotion and information gathering Growth of social networking makes for ubiquitous advertising opportunities Search specification allows for targeted advertising Viral marketing spread through the web via web, , blogs, video, and other mobile media

Innovation & Product Development: death of an idea

10% of ideas reach the test market stage 50% of new products fail in test marketing 50% of those fail on national launch only 2.5% ever enter the marketplace 1 entrant for every 64 ideas the average new product that fails costs about $50 million some product failures have losses of over $100 million for some companies 64 ideas 1 idea Testing time Ideas Marketing decreases costs, improves the quality of ideas, and ensures better fit with the marketplace

Product Product variety Quality Design Features Accessories Brand name Packaging Sizes Services Warranties Returns, repairs & support Place Distribution channels Coverage Assortments Locations Inventory management Warehousing availability Order processing Transportation costs Price List price Wholesale pricing Seasonal pricing Discounts Price flexibility Allowances Payment period Payment methods Credit terms Product bundling Promotion Sales promotion Personal selling Advertising Sales force Public relations Direct marketing Target Market The Four Ps

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Vishay Semiconductor Company Example: Products positioned along the product lifecycle

Fairchild Semiconductor Product Lifecycle

But sometimes it crashes…

Effects & responses IntroductionGrowthMaturityDecline CompetitionNone of importanceSome emulatorsMany rivals competingFew with rapid shakeout Overall strategyMarket establishment; persuade early adopters to try product Market penetration; persuade mass market to prefer the brand Defense of brand position; check competitor inroads Prepare removal; drain brand of all benefits ProfitsNegligible due to high production & marketing costs Reach peak levels due to high prices & growing demand Increased competition cuts into profit margins & total profits Declining volume pushes costs to levels that eliminate profits Retail pricesHigh to recover excessive launch costs High to take advantage of growing demand What traffic will bear; avoid price wars Low enough to permit liquidation of inventory DistributionSelective as distribution is built up Intensive; use small trade discounts since dealers eager to store Intensive; heavy trade allowances to retain shelf space Selective; unprofitable outlets slowly phased out Advertising strategy Aim at needs of early adopters Make mass market aware of brand benefits Advertise to differen- tiate similar brands Emphasize low price to reduce stock Advertising emphasis High to generate awareness & interest in early adopters & dealers to stock the brand Moderate to let sales rise on momentum of word- of-mouth Moderate since most buyers are aware of brand characteristics Minimum expenditures to phase out product Consumer roles & promotion expenditures Heavy to entice target groups with samples, coupons, etc. to try brand Moderate to create brand preference (advertising for this) Heavy to encourage brand switching to convert buyers into loyal users Minimal to let the brand coast by itself

What’s your product lifecycle mix? Team activity: Construct a product life cycle diagram for one of the companies in your team

High growth business strong in competitive market; high point share & ideal business; promote question marks & support R&D Low growth business with low point share; were stars but have lost their attractiveness; finance question marks and stars Low point share but may have high growth rate and therefore potential, but require high effort to grow; risky new ventures may become stars or dogs Low relative share and low expected growth rate; may generate enough points to sustain but not competing; possible niche market; consider divestment

Enterprise Resource Planning System (ERP): BCG Matrix of products

The GE/McKinsey Matrix Business Strengths Industry Attractiveness High Medium Low Invest in, growth strategy Monitor performance, selective strategy No growth or investment, consider divestment or liquidation Market size & growth Industry profit margins Competitive intensity Seasonality Cyclicity Economies of scale Technology Social, environmental, legal, & human impacts Relative market share Profit margins Ability to compete on price & quality Knowledge of customer & market Competitive strengths & weaknesses Technological capability Caliber of management

Ansoff’s Product/Market Matrix Existing productsNew Products Existing Markets New Markets Market Penetration: Increase product purchase in existing markets (withdrawal, do nothing, consolidate, retrenchment) Revitalize brand image Coordinate advertising and sales training Adapt to market change Increase market share Increase consumer usage (frequency, quantity, new application) Product Development: Introduce new products into existing markets; can be risky & expensive Product launch Add product features & refinements Develop new products for same market Market Development: Explore new markets for existing products; when distinctive competencies rest with product not market Expanding geographic distribution Targeting new customer segments Diversification: introduce new products into new markets; horizontal, vertical, conglomerate Acquisition/merger New business venture

Conclusions about marketing matrix models-- There is a risk of using matrix models is misclassifying businesses Use multiple models to ensure better coverage Know the strengths and limits of each model; when to use and avoid them Integrate the information from matrices with other sources of information and comparison Don't let the matrix make decisions-- people make decisions!

Next Week: Market S-e-g-m-e-n-t-a-t-i-o-n Be able to describe yourself using segmentation concepts Be able to discuss how your company uses (or can use) segmentation Explore a market segment for your company and how that might add value to your business