1. BUAD 307—MARKETING FUNDAMENTALS
MARKETING OVERVIEW

3. Learning Objectives Identifying
The scope and basic objectives of the marketing function
Customer value
Obstacles to delivering the value to the customer
Benefits of and opportunities for relationship marketing

4. Usage and Reach of Marketing
Who markets?
Businesses
Government units
Non-profit organizations
Cause related organizations
What is marketed?
Goods
Services
Ideas
Who buys?
Ultimate consumers
Organizational buyers
For internal use
For resale (wholesalers, retailers)
Manufacturers (components)
Customer benefits?
Utility
Consumption
Convenience

5. 2013 American Marketing Association (AMA) Definition
Marketing: “The (1) activity, (2) set of institutions, and (3) processes for (4) creating, (5) capturing, (6) communicating, (7) delivering, (8) and exchanging (9) offerings that have (10) value for (11) customers, (12) clients, (13) partners, and (14) society at large.” (Numbering added.)
Definition not needed for the exam!

6. MARKETING ACTIVITY INSTITUTIONS PROCESSES CREATION COMMUNICATION
DELIVERY
EXCHANGE
CUSTOMERS
OFFERINGS
VALUE
CLIENTS
PARTNERS
SOCIETY

7. Marketing As an Exchange
Each side receives something more valuable than what it gave up  “win-win” deal and customer value
In a free market, for a deal to take place, both sides should prefer the trade.
Part of the value may be assurance of continued quality over time (value of the brand)
In principle, money does not have to be exchanged.
For goods and services, this is usually the most convenient way of trade.
For ideas, there may be no monetary exchange as such. E.g.,
Voting for a candidate
Engaging in recycling

8. Customer Benefits and Value
IS THE CUSTOMER BENEFIT RECEIVED GREATER THAN THE SACRIFICE (COST)?
YES NO
POOR VALUE
POTENTIAL GOOD VALUE

9. Myth vs. Reality
Imitating successful competitors is usually NOT an effective strategy
Selling things online is usually MORE expensive than selling through conventional retailers
Products with high value-to-bulk ratio and high absolute (dollar) margins tend to be better suited for online sale
Having a great product does NOT necessarily mean you will be successful—you also need
Awareness by customers (that the product exists and what it does)
Access to distribution (conveniently located retailers and/or conveniently accessible online ordering)

10. Sources of Profitability for Amazon
Electronic content (e-books, e-periodicals, music, online video content)
Brokering of used merchandise (e.g., books, CDs, DVDs) sold by consumers to other consumers
Server services (e.g., hosting web sites)
Data processing services (e.g., assessing and disbursing sales tax for other online merchants)

11. Communicating value to customers
Customers must know that the product exists
Awareness through advertising requires a very elaborate, lengthy, and expensive campaign
Social media and “guerilla” marketing
Exposure through retail setting
Retailers must carry the product—for every new one they take on, they generally must sacrifice an existing one
Even if carried, a product may “drown” among the “sea” of other products
For some products, the customer must see what the product actually does in order to recognize value (e.g., a Pillow Pet is not just “another stuffed animal.”

12. Delivering value to the customer in a convenient and cost effective manner
Brick-and-mortar stores
Existing stores must generally drop an existing product to make room for a new one (and retailers may have relationships with existing brands)
Some stores—e.g., convenience stores—have room for few brands in each category. Stores in many foreign countries are smaller than typical U.S. stores
The customer must be able to find the product
Online
Delivery to customer must be cost effective
The customer must know where to order (easier if carried at major sites such as Amazon)
The product must be findable at the site
Showing up in customer search
Specific brand (requires awareness)
General category
Featured product
Suggested--e.g.,
“Customers who bought this also bought…”
Individualized recommendation based on prior purchases

13. Relationship Marketing
Selling (selling existing products with whatever methods are necessary) vs. marketing orientation (serving customer needs whether in current or new forms)
Maintaining a relationship with the customer over time rather than just focusing on immediate sales
Anticipating customer needs
Providing solutions
Investing in products and services optimized for the customer

14. Products vs. Solutions NETFLIX STARTED OUT SHIPPING DVDs TO CUSTOMERS
ABILITY TO WATCH MOVIES
ORIGINAL PRODUCT
OFFERING
ACTUAL CUSTOMER
BENEFIT
PRACTIVE OF
CUSTOMER RATINGS
BROUGHT
RECOMMENDATION DATA BASE
NOW MOST MOVIES ARE OFFERED THROUGH STREAMING
EXISTING CUSTOMER BENEFIT BROUGHT ALONG TO NEW FORM
(COMPETITIVE ADVANTAGE)
ENHANCED WAY OF PROVIDING THE CUSTOMER BENEFIT
(SOLUTION)
You will NOT be asked to reproduce this specific model on the exam!

16. Value
Benefits—perceived by the customer (may not be objectively accurate)
Convenience
In delivery
In usage
Reliability
Durability
Performance
Style/aesthetics
Prestige
Service component
Sacrifices—examples
Money
Time
Risk

17. Value: Recap
A low quality, low price product represents poor value for many customers
A very high benefit product at a high price can represent value for some segments
Customer segments differ in what they find valuable

18. BUAD 307—MARKETING FUNDAMENTALS
MARKETING STRATEGY

19. Learning Objectives Identify
Identify firm and/or market business models
Organizational missions
The scope of strategic decisions
Tradeoffs that firms must make in their decisions
Cumulative and “spill-over” effects of strategic decisions and the need for consistency
The need for industry balance and firm unit cash flow balance

20. Business Model
A representation of how a firm intends to achieve desired objectives (usually eventual profitability) over time
E.g., “freemium” products: Some customers get the basic product for free as a means of developing awareness and preference; money is made directly only on those customers who buy a more advanced version
E.g., ride sharing (Uber and Lyft): A commission is earned as the firm creates value by connecting customers and service providers

21. Organizational Mission
Brief statement of the “big picture” of what the organization exists to do
E.g., for Apple, to produce elegant, user friendly consumer technology
Focus on enduring strategy and contributions over time rather than on specific products at specific times
Subject to reconsideration over time technology, values, competitors, and customer needs change over time

22. Strategy
Plan
To achieve desired objectives (e.g., profit, market share)
Based on available resources (e.g., financial, patents, trademarks, people, brand name/ image , distribution channels)
Subject to choices made (e.g., willingness to take risk, short run vs. long run goals)

23. MARKETING STRATEGY STRATEGY RESOURCES ENVIRONMENT PRIORITIES/
OPPORTUNITY
COSTS
EXPERIMENTATION/
EXPRIENCE

24. Market Balance A WELL BALANCED
GADGET INDUSTRY
Different firms should attempt to offer different forms of value, appealing to different customer segments—otherwise, competition is likely to degenerate into price competition
EASYTECH, LTD.
EASE OF
USE
TROJAN CREATIONS,
INC.
PERFORMANCE
BRUIN PRIDE, INC.
LOW
PRICE
MICROGEEKS, LTD.
SMALL
SIZE
PATIENCE-IS-STUPID,
INC.
SPEED

25. Core Competencies
Broad, fundamental capabilities—not readily imitated by competitors— in which an organization excels
Deployable across a variety of products and situations
E.g., stylish design of electronics (Apple)
E.g., economies of scale and broad assortment of online and supermarket merchandise (Amazon)

26. Examples of Objectives
Profit level
Profit growth
Total unit sales
Growth in unit sales
Growth in dollar sales
Total dollar sales
Brand perception by customers
Value
Quality
Innovativeness
Reliability
Brand name recognition
Brand name recognition by product category
Product availability
Availability across retailers and other distributors
Store placement
Percentage of products sold at full price
Percentage of revenue from new products
Affordability of product
Elimination of unsafe product ingredients
For the exam, you should be able to identify examples of objectives as such—i.e., something that the firm sets out to accomplish, usually within a certain time frame. You do NOT need to memorize this list!

27. Notes on Objectives
Certain objectives must be accomplished (e.g., brand awareness, distribution coverage) before others can be effectively attempted (e.g., profit level)
Although a certain level of profit would be an objective for most firms, many firms may not be able to focus on this until they have addressed prerequisite objectives (e.g., brand awareness, sales volumes, perceived brand quality)
Objectives are usually sought over a specified time period (e.g., next quarter, year, or ten year period)
Plan can specify the amount of time designated for various stages of objectives

28. An Example of Objectives Over Time
ADVERTISING
PAID STORE PLACEMENT
IN-STORE DEMONSTRATIONS
ABILITY TO CHARGE PREMIUM PRICE
BRAND
AWARENESS
WIDER
DISTRIBUTION
INCREASED
VOLUME SALES
QUALITY
INCREASED PROFITS
RESEARCH & DEVELOPMENT
INPUTS
OBJECTIVES

29. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
INTERNAL
TO FIRM
EXTERNAL
STRATEGY
WEAKNESSES
OPPORTUNITIES
Note that merely listing each factor has limited use. We need to analyze:
How to take advantage of strengths and opportunities
How to address weaknesses and threats
How to use strengths and opportunities to counter weaknesses and threats
THREATS

30. Compensating for Weaknesses and Threats
STRENGTHS
Direct effect of weaknesses
OPPORTUNITIES
Direct effect of strengths and opportunities
Using strengths and oppor-tunities to compensate for weaknesses
PERFORMANCE
STRENGTHS
OPPORTUNITIES
THREATS

31. SWOT Deciding where to concentrate resources
Taking advantage of strengths and opportunities
Addressing weaknesses and threats
Using strengths and opportunities to compensate for weaknesses and threats

32. SWOT—Apple Strengths Weaknesses Opportunities Threats
Some vertical integration—content and devices
Market leading/dominating position
Strong brand name
Financial strength
Strong R&D
Strong demand for iPhone
High selling prices across iPhones, iPads, and computers
Weaknesses
Heavily dependent on the iPhone and iPad lines
No major recent new product innovations for several years (and none announced)
Dependence on the legacy of Steve Jobs for brand image
Opportunities
ApplePay
Wearable devices
Increased global sales of iPhone
Wide availability of iPhone X
Threats
Android devices (free operating system)
Counterfeiting and industrial espionage
Competition—both on low cost and on innovative features
Declining desktop and laptop markets in developed countries
Unstable world economy
Increased import tariffs
Foreign trade barriers placed in retaliation for possible U.S. barriers
Source: “Apple,” Global Markets Direct SWOT Reports (from Business Essentials), November, 2017

33. SWOT—Apple—Applications
Using strengths to compensate for weaknesses and threats
Use of large cash reserves to develop potential new products
Developing “must have” apps only available for iOS (taken advantage of cash reserves and in-house talent)
Campaign to “convert” Windows users who own iPhones and/or iPads to Apple computers
Using opportunities to compensate for weaknesses and threats:
Heavy investments in building retailer infrastructure to use ApplePay
Having iPhone X featured in “hot” movies or TV series

34. THE MARKETING ENVIRONMENT

35. Learning Objectives
Identify forces that are beyond the control of the firm and may require it to adapt its strategies

36. THE MARKETING ENVIRONMENT
Culture (covered under International Marketing)
Demographics
Social
Technology
Economic
Political and Legal Factors

37. Some Things That Have Changed In Our Lifetime…
Widespread use of high speed, high bandwidth and wi-fi Internet access
Online shopping by mainstream consumers and individualized product recommendations
Movies streamed online rather than DVDs mailed or rented in stores
Spread of digital photography, “selfies”
Widespread use of cell phones
Smart phones replacing more limited scope cell phones
Emergence of social networking sites
GPS technology becoming available to consumers
Increased concerns about security (since 9/11/2001)

38. “In 1989, a new Blockbuster was opening every 17 hours.”
Washington Post, April 26, 2017.

40. Japan: Actual and Projected Population Figures

41. China: Actual and Projected Population Figures

42. Social Factors Values—tensions Later ages of marriage
Value of privacy and security vs. convenience
“Green” products vs.
Cost
Convenience
Performance
Later ages of marriage

43. Case: Hostess (Twinkies)
In 2011, Hostess, the manufacturer of Twinkies, was unable to negotiate a cost effective deal with its main union
This happened on top of a “triple whammy” that had hit packaged goods manufacturers:
Costs of ingredients had gone up due to increased costs of petroleum (needed for fertilizer, transportation, and processing)
A consolidation in the supermarket industry and the entry of Walmart’s supercenters had put downward pressure on wholesale prices
The recession had caused a number of customers who in the past bought national brand items to switch to store brands and lower tier brands.
In 2013, Hostess entered bankruptcy. The firm was sold off.

44. Case: Boeing Boeing 747-8 never got significant orders
Modest update from older version could not compete with A380.
Very long lead time in developing the next generation of planes
Fluctuating World economy can dramatically affect demand for new aircraft with very short notice
“Glut” of nearly new planes available during global recessions
Long backlog in orders during prosperity
Possible increase in trade barriers
Political developments affect opportunities to sell to different countries (e.g., Iran)
Political changes in export assistance
Uncertainty about long term fuel prices
Under high fuel prices, the Boeing 787 can reduce costs
Under lower fuel costs, the A380 can reduce labor costs

45. ETHICS AND SOCIAL RESPONSIBILITY

46. Some Ethical Issues Misleading advertisements and marketing in general
Taking advantage of consumer ignorance
Marketing of harmful products
Physically dangerous
Over-consumption; marketing to people living above their means
Marketing of products banned or not marketed in the U.S. to other countries

47. One Approach to Evaluating Ethics of Marketing Activities
IS THE ACT DECEPTIVE, MANIPULATIVE OR MISLEADING?
IS THERE A SUFFICIENTLY REDEEMING PURPOSE?
YES
Yes
YES NO NO No No
MORE LIKELY TO BE ETHICALLY PROBLEMATIC
LESS LIKELY TO BE ETHICALLY PROBLEMATIC
DOES THE ACT PREY ON PERSONAL INSECURITIES?
YES
Yes
YES
Yes NO
IS A HARMFUL OR DANGEROUS PRODUCT INVOLVED?
DO BENEFITS APPEAR TO OUTWEIGH RISKS TO THE USER? NO
YES
Yes NO No

48. “Win-Win” Deals and Social Responsibility
By pooling resources, different organizations may each get more than what they put in
Firms may be able to contribute not only cash but also relevant expertise
Favorable publicity may be worth more than the same amount spent on advertising
Charitable groups may provide access to potential customers

49. Promotional Events
A large retail chain might sponsor a concert series by paying all expenses in return for considerable publicity
Triple “win-win-win” deal:
The charity receives the proceeds without having to pay costs
The sponsor receives publicity. Tickets are bought in the store or on its web site.
An aging artist—whose fans are now in their prime earning years—gets an opportunity to revive a career or promote a new venture (e.g., movie role)

50. INFLUENCES ON THE FIRM AND ITS CHOICES
CULTURE
DEMOGRAPHICS
ENVIRONMENT
SOCIAL
RESOURCES
ECONOMIC
TECHNOLOGY
LEGAL/POLITICAL
PROFIT
PRESSURE
FIRM
OPPORTUNITIES
SOCIAL RESPONSIBILITY