MARKETING MANAGEMENT 111  Which orientation do you think would most

likely lead to an exchange?

CHAPTER 1: WHY IS MARKETING IMPORTANT?
 Who do you think is responsible for marketing?
Do the following statements adequately define
WHO IS RESPONSIBLE FOR MARKETING?
marketing? Why or why not?
 “Marketing is sales and advertising.” Marketing and Customer Satisfaction is
 “Marketers make people buy stuff they don’t Everyone’s Responsibility
need and can’t afford.” Marketing should permeate the firm
 “Marketers are the people who call you while  Accounting/ Finance
you’re trying to eat dinner.”  Sales
Discussion Questions  Research and Development
 What is the definition of marketing?
MEASURING MARKETING SUCCESS
 What can be marketed?
 Chief Marketing Officers (CMO) should quantify
MARKETING is defined as an exchange between a firm
results when possible.
and its customers.
 Sometimes the effectiveness of marketing
programs is easy to quantify.
 Did the coupon promotion lift sales?
- Measure the percentage sales increase, etc.
 Did the direct mail campaign increase web
usage?
- Measure the number of web visits, etc.
 However, sometimes the effectiveness is not
easy to quantify
 Was the segmentation study effective?
- Difficult to quantify
WHAT WE CAN MARKET?  Did the advertising campaign increase sales?
 Goods - Difficult to quantify because great
 Experiences advertising is geared toward long-term
 People brand building not short-term results.
 Services MARKETING MANAGEMENT FRAMEWORK?
 Events
 Ideas The 5Cs, STP, and the 4Ps constitute the
 Companies marketing management framework
 Information
 Places
 Industries

ORIENTATIONS

1. Product/Production Orientation
- Focus on building products that you like THE 5Cs of Situational Analysis
2. Sales Orientation
Company
- Focus on convincing the customer that your
 The firm’s capabilities, resources, etc.
product works best for them.
a. What does it do well?
3. Customer Orientation
b. What doesn’t it do well? Etc.
- Focus on figuring out what customers want
Customer
then design the product around them.
 The firm’s current and potential customers
 a. What are current customer’s
preferences, buying trends, etc.?
b. What are potential customers’
preferences? Should they be
targeted?
Competitor
 The companies/people firm works against and
how they compare to the firm in terms of
resources, capabilities, customer preferences,
reaction patterns, etc.
Collaborators
 The companies/people firm works with
a. Are these relationships strong? Can
these relationships be improved or
leveraged?
Context
 The macro-environmental forces facing firm
a. What is going on politically or
legally that might affect the firm?
b. What is going on with the economy
that might affect the firm?
c. What trends are occurring in society
that might affect the firm?
d. What technological innovations
might affect the firm?
STP
Segmenting
- Grouping customers with similar needs
Target
- Pursuing segment who makes the most
sense for the firm
Position
- Communicating product’s benefits clearly to
the intended target
- Developed through the 4Ps.
4Ps
Product
- What should constitute your product mix?
What features and benefits should comprise
each product?
Price
- How much should you charge given your
costs, competitive pricing and customer
demand?
Place
- How will you get the product into the
customers’ hands? Will you go direct to
customers or use channel partners?
Promotion
- What communication mix will you use to
communicate with your targets? What
message will you use?
CONSIDERATIONS
 The situation facing the company changes over
time
 Customer preferences change
 Competitors changes offerings
 Government passes new laws, etc.
 Firm must consistently monitor the 5Cs.
 5Cs, STP, and 4Ps are interdependent
- As contextual factor changes, what would
the impact be on distribution channels?
- As a collaborator shifts their demands, what
will that do to our pricing structure?
- As our company sells off a non-performing
function, what impact might have on our
positioning and customer satisfaction.
Marketers must understand the
interdependencies.
MANAGERIAL RECAP
o Marketing can make customers happier, and
companies more profitable.
o Marketing is about trying to find out what
customers would like, providing it to them, and
doing so profitably.
o Marketing facilitates a relationship between
customers and a company.
o Just about anything can be marketed.
o The marketing management framework – 5Cs,
STP, 4Ps – will structure the book.
o If you can remain customer-centric, you’ll be
five steps ahead of the competition.
CHAPTER 2: CUSTOMER BEHAVIOR
The Science of Consumer Behavior
 These are known, reliable patterns that
comprise consumer behavior, including:
 The phases consumers go through when making
a purchase.
 The different kinds of purchases those
consumers make
  How consumers sense and learn become
motivated, form attitudes, and make decisions.
 The cultural differences that influence
consumers.
The Purchase Process
1. Pre-Purchase Phase
Customers recognize a need and desire
Types of Business Purchases
 Some are heavily marketer influenced; some are
not.
E.g: Having trendy clothes vs needing to eat.
Customers search and evaluate products that
address their need.
E.g: Conduct online research, ask friends, etc.
Customers create a consideration set
 All brands considered as candidates for
purchase
2. Purchase Phase
Types of Purchases
Customers narrow the consideration set.
 Customer may delay the purchase
 Customer may decide not to purchase
Customers decide on retail channel
3. Post-Purchase Phase
Customers determine satisfaction
 Did the customer get what he expected?
Customers’ level of satisfaction leads to
 Negative or positive word-of-mouth
 Repeat purchases
 Product returns, etc.
Business-to-Consumer (B2C) and Business-to-
Business (B2B) both utilize the buying process.
 The amount of time spent on a stage depends
upon what is being bought
A business customer is an agent buying
something on behalf of an organization
 Example: Administrative assistants, Operations,
Department, etc.
Three Types of Consumer Purchases
 Convenience Purchases
 Standard, frequently consumed goods
 Low involvement
 Consumers don’t spend much time thinking or
planning the purchase
 Shopping Purchases
 Not as frequently purchased, medium
involvement
 Consumers will spend time and effort prior to
purchase
 Specialty Purchases
 Occasional Purchases, often more expensive,
require more thought: High Involvement
 Customers put much effort into the purchase.
Straight Rebuy
- Low Involvement; purchase what was
purchased last time with little or no thought
Modified Rebuy
- Medium Involvement; something about the
purchase is altered requiring some thought
New Buy
- High Involvement; purchase something that
hasn’t been purchased before requiring
much thought and planning.
 Low Involvement Purchases
 Have higher price sensitivity
 Usually go well with price discounts
 Generally, don’t generate word-of-mouth
 Are usually distributed intensively
 Marketers should focus on how to capture
consumers’ attention
 High Involvement Purchases
 Have lower price sensitivity
 Usually go well with events
 May generate word-of-mouth
 Are usually distributed selectively
 Marketers should focus on providing consumers
with information
Sensation and Perception
Utilize senses to convey information
 Consumers have selective attention; they block
out what is not relevant.
Visual: colors can
 Convey a brand identity (Tiffany’s aqua blue)
 Make products stand out (Ipod’s white)
 Convey meaning (black = mourning)
Hearing can
 Increase spending
E.g: Quick Tempo Music = Increased spending
 Convey a brand
E.g: Harley-Davidson’s distinctive sound
Taste can
 Distinguish one brand from another
E.g: Coke vs Pepsi
Smell can
 Get attention (Smelling the Cinnabon store)
 Allow product sampling (Perfume in magazines)
Touch can
 Can convey brand imagery
Brand Associations: brands are attached to specific
attributes in consumers’ memory.
 Learning is the process that creates brand
associations
Classical and operant conditions
CLASSICAL CONDITIONING
Pavlov’s Dogs
- Stage 1: a dog drools at site of food
- Stage 2: a dog doesn’t respond to a bell
- Stage 3: ringing a bell while placing food in
front of the dog elicits drool
- Stage 4 (occurs over time): a bell rung in
front of the dog elicits drool
A similar process can be used in advertising and
jingles.
Learning
 Companies may have negative brand
associations in customers’ memories.
 Some companies change names to help create
new associations
e.g: Philip Morris is now Altria

E,g: Well- designed products compared to value e.g: ValuJet is now AirTran
designed products.
OPERANT CONDITIONING
E.g: Ergonomics, clean lines, simplicity, beauty, sensual
Skinner used pigeons to show that learning
experiences, etc.
occurs by positively reinforcing behavior.
Subliminal Advertising - Fixed Ratio Reward: reward is given every
- An ad that is shown so quickly that is time or every 4th time, etc.
doesn’t meet the threshold of liminal - Variable Ratio Reward: reward varies
recognition. - Subject will engage in the behavior more
- Has been debunked by research. often if rewarded on the variable schedule.
Mere Exposure
MASLOW’S HIERARCHY OF NEEDS
 Repeated exposure to an ad brings familiarly
and a positive feeling  Maslow suggests that people must have their
Perceptual Fluency basic needs met before moving onto more
 Customers may pay the most attention to the abstract needs.
content of a message.  Marketers may identify their product with one
 However, the colors, font, etc. make a brand of Maslow’s needs.
impression as well.
e.g: Volvo and safety needs
Learning and Memory
 Many brands are associated with a sense of
 Sensory and perceptual impressions become belonging, social acceptance and respect.
brand associations
Distinguishing Motivations - Some websites aid this process by allowing
users to view a side- by- side comparison of
Utilitarian vs Hedonic
attributes.
e.g: A Honda Civic vs a Mercedes
Cultural differences
Conformity vs Individuality
 Socio-cultural differences influence consumers
e.g: Conformity is high in high school but not later in life. and produce shopping patterns.
 Social class, age, ethnicity, gender, country
Risk-seeking vs Risk-averse culture, etc.
e.g: Risk tolerance may vary with product knowledge E.g: Old monied people seek exclusivity; nouveaus
Attitudes and Decision Making indulge in conspicuous consumption.

 Attitudes and decision- making influence E.g: young people buy furniture; as they get older, they
 Whether consumers need diapers and minivans; then college and finally
- Will buy a brand healthcare.
- Repeatedly purchase it CHAPTER 3: SEGMENTATION
- Become loyal
- Recommend it to others, etc. Segmentation

What are Attitudes?  Psychologists:

- Consumers have different motivations that
 Attitudes are a mix of beliefs and importance drive their purchases.
weights  Economists:
 Beliefs - Imperfect competition exists; consumers
e.g: I think Sprite has caffeine. have heterogeneous needs.
 Marketers:
 Importance - The market is comprised of different
e.g: I think having caffeine is important. segments.
 Segmentation
- Customer may differ on both importance and beliefs. - Breaking the market into more
homogeneous consumer groups
Decision Making:
- A single product, price, promotion is
 With a few choices, consumers easily compare unlikely to satisfy all consumers’ needs.
brands to make decision.
E.g: Miley Cyrus appeals to tweens; Wilford Brimley
 With many choices, consumers use 2 stages:
appeals to seniors.
Stage 1: Determine consideration set
Segments Defined
- Non-contemporary method: if a brand
o Market Segment
doesn’t have important attributes, it is cut.
- Lexicographic method: compare all brands - A group of customers who share similar
on most important attribute: cut brands inclinations toward a brand.
that don’t have it; move on to next E.g: One segment might purchase a car primarily to get
important attribute and compare and cut, from A to B while another segment may purchase a car
etc. primarily to impress their friends.
Stage 2: Determine/ Compare brands in retail.

- Compensatory model (cost/benefits) – One o Marketers’ Goal

excellent attribute can compensate for a - Create marketing mixes that meet the
poor attribute. segment’s needs.
Marketing Segmentation
Types of Segmentation
1.) Mass Marketing
- All customers are treated the same
- Is usually more efficient but not effective in
meeting customer needs
2.) One-to-One
- Each customer serves as his own segment.
- Product is tailored for each person’s desires.
- Is usually more effective in meeting
customers’ needs but hard to achieve
efficiently and may involve quality issues.
E.g: Toyota allows customers to “build” their own Scion;
however, options are limited.
Segmentation
Segmentation falls between one-to-one and
mass marketing
- As segment size increases, segments
become more heterogeneous.
- As segment size decreases, segments
become less profitable.
- Marketers need the “optimal” segment size.
Niche
- Targeting small market that firm serves well
Segmentation Demographics
 Demographics
 Marketers may change marketing mix
o Gender, age, stage in life cycle, education,
income, ethnicity.
 Demographic variables are clear and easy to
recognize.
 However, they may not determine
interests
E.g: Do all older people dislike new technology? Do only
men like to hunt?
Segmentation Geographic
 Geographic distinctions between customers can
change preferences/needs
o Cultural differences can exist between countries
within a country.
E.g: Southern USA prefers spicier food.
o Urban living is different than small town
E.g: NYC residents want smaller dishwashers.
o Hot climates require different products than
cold climates.
E.g: Minnesotans need snow blowers
Segmentation: Geographic/Demographic
- Combining geographic and demographic
information can be powerful
Segmentation: Psychological
 Psychological: get inside the heads and hearts of
customers.
 Attitudes: e.g., Favorable attitude toward
“green” products.
 Knowledge & awareness: e.g., Don’t know
about the product.
 Wants and needs: e.g., Need for safety
 Affiliations: e.g., Members of the AMA
 Traits: e.g., Extroverts who want to socialize
 Expertise & Involvement: e.g., new, motorcycle
enthusiasts.
 Brand attributes sought: e.g., Low price and red
color
 Risk Orientation: e.g., Risk adverse-late
technology adopters
 Aspirations: e.g., Want to be a better cook
 Vary in terms of relevancy to the product.
Segmentation: Psychological/Lifestyle
  Psychological & Lifestyle
- E.g., Gardeners, food connoisseurs, etc.
 Vals: Psychographic segmentation tool
- Marketers determine people’s attitudes and
what they value and use this knowledge to
communicate effectively.
- E.g., strivers are trendy, like to impress,
often impulsive.
Segmentation: Behavioral
Behavioral: behaviors people engage in
- Attitudes can’t be observed; behaviors can
- Intentions do not always equal behaviors
- Behaviors help predict future behavior
Current Users; Non users
- 80:20: 80% of sales come from 20% of
customers
- It costs 6 times more to acquire new
customer compared to retaining loyal.
Patterns of co-purchasing
- Purchase a new house, usually purchase
new appliances, curtains, etc.
- Create opportunities for cross selling
B2C compared to B2C Segmentation
Concept in Action
Automobile insurance industry example
- Industry is large and competitive
- Segment market using cluster analysis
 Survey customers; identify questions
where there is variability in responses
 If no variability in responses, do not
segment on that variable.
- Useful segmentations have variation across
groups.
How to Segment the Market
 Iterate between two approaches
 Managerial: top- down ideation
 Customer-based: bottom-up customer needs
assessment
 Doing both approaches is important
 Managers may hold beliefs that are not
consistent with systematically gathered data
 Begin with understanding the marketplace and
then gather information on the customer’s
perspective
 A segment may look desirable in terms of size
and growth but be saturated with competitors
and not consistent with firm goals.
How to Evaluate Segmentation Schemes
 Does the segmentation scheme have?
1. Data to identify segments?
 Census Data: available but may not be useful
 Vals & Prizm: expensive
 Specific survey may not be available
2. Databases to access segments?
 Databases that give access to the specific
people within your chosen segments
3. Profitability?
 Size matters but so does frequency & depth of
purchase, price sensitivity, segment stability,
growth potential, competitive intensity, etc.
- Use information to estimate segment value
 Be careful not to segment too narrowly
- Determine what matters to your product
4. Fit with Corporate goals?
 Consider your firm’s goals and image
 E.g., Subzero (high-end refrigeration) does not
“fit” with the low-end refrigerator market
5. Actionable?
 Marketer can design something for segment
 It is common to link usage, attitudinal, etc.
variables to demographic variables to make the
segment more actionable/
Segmentation Strategies
 Multiple segments in a workplace
 Breadth Strategy

CHAPTER 4: TARGETING

Once the market is segmented, marketers select

(target) one or more of those markets to
pursue.
 Why it is hard to be all things to all people?
Firms select target markets which are a good fit
with the firm and have good profit potential.

How to Choose a Target

 Top Down: strategic fit

 Does this market fit with who we are?
 Understand firm’s resources, strengths,
weaknesses, brand personalities, etc.
 Bottom up: profitability
 Depth Strategy  How profitable will this segment be?
 Function of the current market size, its
anticipated growth, current and anticipated
levels of competition, customer behavior and
expectations

 “Go for it” and “avoid” are easy decisions.

 “Hmms” are dilemma scenarios
 Tailored Strategy
 The smartphone market Is attractive but you
have no strength in this market
  Can you develop a strength in smartphones?
How much will this cost?
 Your strength is in desktops but the market is
unattractive
 Is there any segment that sees value in
desktops? Can we redesign the product to give
it value? How much will this cost?

SWOT ANALYSIS

Perceptual maps show customers’ perceptions

of firm’s strengths/weaknesses relative to
competitors
 In many product categories, price, and quality
are key
 Quality is defined by the industry

SIZING MARKETS CONSIDERATIONS

Strengths and weaknesses are relative to Some estimates are less firm than others
competitors  Give intervals and “what if” scenarios
 Should include customers’ perspectives Each estimate should be as precise as possible.
 Requires market research The more precisely defined the segment, the
 Strategies: easier the numbers are to estimate.
 Leverage firm’s strengths
Concept in Action: Market Sizing
 Improve or design around firm’s weaknesses
Opportunities and threats are usually driven by  How many RVs can I sell?
changes in one of the 5Cs.

For example:

 The rise in Internet access

 Growing Hispanic population in U.S.
 New competitors
 New offerings from existing competitors
 Lack of competitors within a market.
 Aging Baby Boomers

COMPETITVE COMPARISONS

Companies typically assess their strengths

relative to their competitive.
 25 million is the market potential (ceiling)
 It doesn’t include the number of retirees who
are interested in RVs
 Need more research
 Research uncovered two segments
 Married retirees who prefer to buy RVs
 Assume 95% buy and they travel in pairs
 Widowed retirees who prefer to rent
 Assume 80% rent and they travel with 4 friends
Concept in Action: Sensitivity Analyses

Conduct sensitivity analyses on the harder to

verify numbers
 Increase and decrease the numbers and
determine the impact on market size.
 This process will determine
- Which numbers have the biggest impact
 Conduct more research to ensure accuracy
- The upper and lower bounds of the market,
which will help planning

Concept in Action: Additional Factors

Additional Factors – Estimate growth

 Use census to determine size of next cohort
 Obtain sales data for previous years and
extrapolate using a moving average

E.g., 3 year moving average would average years 1, 2, 3;

then average years 2, 3, 4; then average years 3, 4, 5;
then fit a curve to the data (regression)

Additional Factors – Profitability

Need to determine pricing
- Selling RVs is a good; Renting is a service
Estimate fixed and variable costs
Additional Factors – Competition
How fierce is the competition? Is there one firm
or 30 firms? Does the one firm dominate the
market?
- Search the yellowpages.com for RVs

Concept in Action: B2B Market Sizing

Census.gov cross-classifies businesses by sector

(e.g., NAICS codes) and size (e.g., by sales or
number of employees)
- RVs might be sold to mobile dentists, blood
collectors, salons, etc.

Market Sizing

 Use the purchase decision making process:

Awareness, trial, repeat, etc.
 Population x %aware x %trial x %repeat
 Multiply by how much and how often buy
 (Population x %aware x %trial x %repeat) x per
annum purchase
 Multiplied by average retail price paid