Lecture 3: The Company

- How do groups make decisions? They tend to be more rational.

- First step in marketing is knowing what type of company it is. Determine corporate
strategy
- Companies must know how to adapt to changes in the marketplace
- E.g. Canadian government legalizing marijuana, how will companies providing cigarettes
respond?
- Corporate strategy (U of T) versus business unit strategy (faculty of management)

Corporate strategy

- First, determine a mission statement. It could be to make people’s lives better, or

anything as long as the company has meaning and the company is not only just making
products for profit.
- Next, must find company’s core competence. What makes your company better than
other competitors? In what areas are you competing with yourself or with competitors?
- A company can be broken down into smaller units (a main company that owns other
smaller companies)
- The analysis of current portfolio is to understand the role of the company in the market
(e.g. Southwest airlines, is a discount airline and would not hire an expensive
spokesperson) and must integrate its goals into SBUs (e.g. Apple owns Beats which are
Bluetooth headphones and so they eliminate the headphone jack from the new iPhone)
- The final step is to develop a plan for growth, which is to think of alternatives (e.g. Coke,
with new health concerns for sugary drinks, Coke may buy a carbonated water
company) and evaluate the results by looking at company performance and comparing
it to the goals of the company (SMAC)

Ethics

- When there is a direct competition, the ethics can affect how a consumer perceives
these companies that engage in direct competition in its marketing materials
- If a company cannot eliminate its harm to society, it needs to show its effort in limiting it
- Engaging in competitive marketing is not illegal, but laws are usually created from
ethical problems
- People may not feel comfortable seeing certain ads in media, but in the perspective of
the marketer it works and it will sell the product
- Ways that companies respond to ethical concerns:
o Reaction strategy: Ignore/deny
o Defense strategy: Fight/give in
o Accommodation strategy: give in (NBC changing guidelines for alcohol ads)
o Proactive strategy: take responsibility without provocation (e.g. recalls)
- Ethical issue: product placement- is it ok to show ads in a show? Shouldn’t products be
in advertisements?
 - Digital product placements: by placing products into the show after they aired/filmed
- Some marketers believe subtle advertising would be effective as customers do not even
notice it
- Subliminal advertising is by flashing messages for short time and it causes changes in
consumer behaviour according to an experiment; however, it is proven to be wrong by
CBC and subliminal advertising does not work
- Native advertising: when advertising is so deeply embedded into a piece of media (e.g.
the website Buzzfeed is 100% branded by advertisers)
- Price can be an ethical issue (e.g. when a credit report says its free, it doesn’t make it
free when you access it more than once since it has your credit card number, it will
charge it)
- E.g. some discount cards are not saving consumers money, but consumers believe it will
save them money since they paid membership
- Some products are not ethical (e.g. after 9/11, there was a lot more patriotic products)
and may cause some customers to not want to buy as they see the products as
exploitation
- Is it ethical for brand names to spend so much research into the packaging of the
product, while cheaper brands copy the design? (generics)
- Some companies try to reduce the size of the product without changing the price
(ethical?)
- Grocery stores by placing bread in the back of the store causing customers to buy more
- How to place products (left vs right) (e.g. Walmart places its own product on the left
beside TUMS, since most are left handed)

Marketing Math

- To determine how much marketing costs compared to the revenue needed to cover it
- Marketing math helps to determine whether to branch out to new products or focus on
current product or when deciding between different ideas
- 3 types of costs:
o fixed costs, costs that never change
o variable costs, how much would it take to produce one more product
o total costs, fixed costs + variable costs
- Determine the break-even volume when total revenue = total costs
- Fixed costs: production plant, engineers, salespeople, advertising, warehousing
- Production workers: depends on situation
- Variable costs: rebates
- Margin is how much the selling price exceeds the purchase price