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Marketing 101 For Business Plans

Presented by: Leslie Kendrick JHU Marketing Lecturer January 2007

Marketing 101 For Business Plans

Presenter’s Bio:
  

B.A., Advertising, M.B.A., Marketing. 12 years as a marketing practitioner. Worked in Sales and Marketing Management for 2 major publishers (Harper & Row, LWW Medical) and a major apparel manufacturer (Londontown). 3 years experience in business-to-business sales support (sold to pharmaceutical companies). 5 years experience reviewing JHU student business plans, attending finalist presentations & hearing judges’ feedback!

Test Your Marketing “IQ”
Answer True or False to the following statements: 1) 2) 3) 4) 5) 6) 7) 8) 9) __“Marketing” and “selling” are the same thing. __The best way to sell a product is “direct” (without an intermediary). __My “target market” and “buyer” are always the same. __Devoting most of my promotion budget to magazine advertising will guarantee my success. __Budgeting $30,000 for the “marketing” budget, without breaking down this amount by promotional vehicle is sufficient. __Budgeting $50,000 for a sales rep. is more than enough. __The sales process is similar for consumer and business products. __I can develop a marketing plan and budget without quantifying the size of my target market. __I can convince the judges of the feasibility of my idea and its market potential without incorporating end-customer research or channel research into my plan.

you’re ready to go without listening to me for the next 30 minutes!  . you need to stay for this presentation! If you answered “FALSE” to ALL of the statements and you can explain why they are false.Scoring Your Marketing “IQ” Test  If you answered “TRUE” to any of the statements on the prior slide.

costs.Marketing 101: Outline By the end of this talk. budget for? What are the differences between the promotional mix elements in terms of characteristics. response rates? What type of market research should I conduct to support my business idea (that is quick. but credible)? . cheap. we will have answered the following questions:        What is marketing? What is market segmentation and how do I use it to better quantify my target market? What is a SWOT analysis and how will it help me? How is marketing to consumers versus businesses different? What is the marketing mix and what “mix” decisions do I have to make.

promotion an distribution of ideas. .What Is Marketing? American Marketing Assn.” Source: Marketing. goods and services to create exchanges that satisfy individual and organizational goals. Definition: “The process of planning and executing the conception. by Lamb et al. pricing.. 2004. 7th ed.

. 7th ed. similar and identifiable groups.What Is Market Segmentation? Definition: “The process of dividing a market into meaningful. 2004.. buying behavior. . by Lamb et al. Source: Marketing. 3) Consistent with marketing concept of satisfying customer wants and needs. 2) Allows for the tailoring of the “Marketing mix” to specific segments (also cost effective).” 3 Reasons That Segmentation Is Important: 1) Enables marketers to identify customers with similar needs.

 Benefit: by the benefits customers seek. climate. gender.What Is Market Segmentation (con’t)? Segmentation for Consumer Markets:  Geographic: by region. country.  Usage-rate: by the amount of product bought or consumed.  Demographic: by age. by Lamb et al. ethnicity.  Psychographic: by personality or lifestyle. . Source: Marketing. income. family lifecycle (single. 7th ed. married).. 2004.

only) Ob/gyns under age 55 (demographic) Subset of 39.S. 2006 Healthcare List Catalog. .071 ob/gyns (U.What Is Market Segmentation (con’t)? Hypothetical Example: Product: Total Market: Market Segmentation: Target Market: Device for Ob/Gyn Physicians 39. Inc.071--need to quantify! Source: AMA Ob/gyn counts from MMS.

What Is Market Segmentation (con’t)? Segmentation for Business Markets:  Company Characteristics—location. 7th ed. . Source: Marketing. quality. service.  Buying Processes—purchasing criteria such as price. type of company.. product use. size of company. 2004. by Lamb et al.  Customer Relationship—the type/significance of the relationship they have with their customer.

of Homebuilders Luxury home builders (company type) Subset of 69.000 “builder” members of Ntl.nahb. .org). 2005. Assn.What Is Market Segmentation (con’t)? Hypothetical Example: Product: Total Market: Market Segmentation: Target Market: Device for Residential Homes 69.000--need to research & quantify Source: National Association of Home Builders counts from web site (www.

economic. Kotler & Andreason... financial marketing. 8th ed. 5th ed. social. political/legal.What Is A SWOT Analysis?   A “snapshot” of your company’s current internal strengths & weaknesses (management. personnel. manufacturing. . 1998 and Strategic Marketing for Nonprofit Organizations. Source: Strategic Marketing. 1996. competitive. R&D) AND Your assessment of future opportunities and threats relating to all the environments external to the firm (technological. natural). Kerin & Peterson.

How Does A SWOT Help Me?   A strong SWOT analysis allows you to leverage off the internal strengths of the company and match them to opportunities in the external environment. . SWOT Handout.

How Does My Marketing Effort Differ For Consumers vs. concentrated Smaller Many Dispersed Distribution structure Nature of buying Buying influence More direct More professional Multiple More indirect More personal Single Type of negotiations Use of reciprocity Use of leasing More complex Yes Greater Simpler No Lesser Main promo. Businesses? Characteristic Demand Business Markets Organizational Consumer Markets Individual Purchase volume # of customers Location of buyers Large Fewer Geogr. Method Personal selling Advertising .

the marketing mix consists of:  Product  Price  Promotion  Placement/Distribution .What Is The “Marketing Mix”? Also known as the 4 “P”s.

or any combination of these. a service.  Business products & consumer products. Source: Marketing.What Is The “Marketing Mix”? Product:  Defined as a good. trademark. 2004. . warranties.. by Lamb et al. packaging. an idea (“recycle”). labeling.  Considerations—brand name. 7th ed.

Source: Marketing. 2004. .  Key: choose a price that will earn a fair profit. 7th ed.. etc. by Lamb et al. finance. and that equates to the perceived value to target customers. sales. distribution.What Is The “Marketing Mix”? Price:  Revenue (price times units sold) is what pays for every activity of the company: production.

What Is The “Marketing Mix”? Pricing Objectives:  Profit Oriented --Profit Maximization: setting prices so that total revenue is as large as possible relative to total costs. 2004.. Source: Marketing. 7th ed. Dupont and GM use target ROI as their main pricing goal. ROI (also called “return on assets”): measures management’s effectiveness in generating profits with available assets. . --Target Return On Investment. ROI=Net profit after tax divided by total assets. by Lamb et al. --Satisfactory Profits: a “reasonable” level of profits (for stockholders & management).

Examples: selling excess inventory at discount (post holiday season) or selling old model cars at year-end. by Lamb et al. 7th ed. --Sales Maximization: Firm ignores profits. Used when strapped for funds and need to generate maximum cash in short run. . 2004.. competition and the environment as long as sales are rising. But some companies like P&G switched from market share to ROI objectives when they saw that a large market share doesn’t always equate to large profits.What Is The “Marketing Mix”? Pricing Objectives:  Sales Oriented --Market Share: a company’s product sales as a percentage of total sales for that industry (reported in units or dollars). Source: Marketing.

--Requires minimal planning. 7th ed..What Is The “Marketing Mix”?  Status Quo Pricing --Seeks to maintain existing prices or meet competition’s prices. --Often occurs with firms competing in an industry with an established price leader. Source: Marketing. . 2004. by Lamb et al.

--Inelastic Demand is when an increase or decrease in price will not significantly affect demand. product durability. Source: Marketing. 2004. by Lamb et al. . --Factors affecting elasticity include: availability of substitutes. a product’s other uses. 7th ed.. price relative to purchasing power.What Is The “Marketing Mix”? Other Pricing Considerations:  Elasticity of Demand --Elastic Demand is when consumer demand is very sensitive to changes in price.

Source: Marketing. Considers the cost of buying the product from the producer. The difference between the retailer’s cost and the selling price is the gross margin.. .What Is The “Marketing Mix”? Cost Determinants of Price:  Markup pricing --Popular with wholesalers and retailers. 7th ed. 2004. by Lamb et al. --Advantage is its simplicity. Disadvantage is that it ignores demand and may result in over.or under-pricing. plus amounts for profit and expenses not otherwise accounted for.

What Is The “Marketing Mix”?  Profit Maximization Pricing --Occurs when marginal revenue equals marginal cost. Break-Even Pricing --Determines what sales volume must be reached before the company breaks even (total costs=total revenue). 2004.  Source: Marketing. . 7th ed. by Lamb et al. --Limitations: some costs are hard to classify as fixed or variable & also.. this method ignores demand. --Advantage: tells the firm how much it must sell to break even and how much profit can be earned if a higher sales volume is obtained.

2004.What Is The “Marketing Mix”? Choosing a Pricing Strategy:  Price Skimming --Charging a high introductory price. by Lamb et al. the firm may lower its price to reach larger market segments. . --Used when the product is perceived by the target market as having unique advantages.. 7th ed. --But as a product moves through its lifecycle. --Allows management to recover its product development costs. Source: Marketing.

. so requires a higher volume of sales to reach break-even. Effective in a price sensitive market. Often seen when large market share is the pricing objective. --Disadvantage: lower profit per unit. --Goal is to capture a large share of a large market.What Is The “Marketing Mix”? Choosing a Pricing Strategy:  Penetration Pricing --Charging a low price initially to reach the mass market.

TV. .. 2004.) Source: Marketing.What Is The “Marketing Mix”? Promotion:  Consists of 4 elements known as the Promotional Mix: --Advertising (print. by Lamb et al. rebates) --Personal Selling (face-to-face. sales rep. 7th ed. radio. internet) --Public Relations (press releases) --Sales Promotion (contests.

feedback Speed of Feedback Message flow Content control Speed Message flexibility Indirect. Nonpersonal Little to moder. nonpersonal Little Delayed One-way Yes Fast Same message PR Indirect.What Is The “Promotional Mix”? Advertising Communicator Control Amt. face-toFace A lot Immediate Two-way Yes Slow Tailored to buyer . Varies One-way Yes Fast Same message Personal Selling Direct. nonpersonal Little Delayed One-way No Usually fast No control over message Sales Promotion Indirect.

sales should be derived from response from marketing vehicles chosen such as direct mail. trade shows).e.What Should My Total Promotion Budget Be? Factors to consider:  What your objectives are in terms of sales the first 3-5 years (i. personal selling. .  What industry competitors are spending.

000 to $50. President.  Other (AMA list serve executive feedback): $30.000 per year for products ranging from a food ingredient to a veterinary clinic to an information service/database business.  Medical Devices—3%-6% of net sales. . Higher the first 3-5 yrs. & for publications with greater circulation potential (larger medical specialties). Medical Device Company. Dow Corning Corporation.000$800. Market Experts Inc. and Business Development Manager. Sources: Senior Product Manager.000/yr.What Should My Total Promotion Budget Be? Sample Marketing Budgets:  Medical Journals--$30.

Sources: Rate information extracted from 2006 Web Site Media Kits for Business 2.0 and Obstetrics & Gynecology Journal. --Obstetrics & Gynecology. full-page color ad costs $6.500 (one-time insertion). . full-page color ad costs $63.Costs for Promotion Vehicles Typical Costs For Selected Vehicles:  Advertising (used to create awareness) --Business 2.0.365 (one-time insertion).

list rental & postage. .55 cents/piece or more (Ann Zeller. Direct Mktg.).Costs for Promotion Vehicles  Direct Mail (to consumers) --Cost averages . Includes printing.5% (of total number of pieces mailed).P. --Response rates average 1%-1. copywriting. Assn.. V.

B. .Costs for Promotion Vehicles  Direct Mail (lead generation for B to B) --Response rate for customer data form mailing to develop opt-in list (8-10%). Source: D. Owner.. This rate reflects the use of an incentive (additional cost). Simply Direct (a B to B marketing consulting firm).

DMA). . but you must first build a list (“spam” issue).Costs for Promotion Vehicles  E-Mail Campaigns --Cost averages 9 cents per contact (Zeller.

--Cost for brochure or catalog to hand out at book not included. --Cost to mail (prior to exhibit) to prospects. use of color.Ferelli.700.85 (according to Tradeshow Week’s 1998 survey).P.. V. --Travel. This is strongly recommended in order to attract traffic to your booth. food & hotel expenses for company Sales Reps not included above.12/square foot.500-$2. --Average cost for 10 x 10 ft. Marketing & Sales. --Add another $2.600 for exhibit transportation. type of printing. booth is $1. booth table and booth lighting. electricity. Two Hands (a jewelry company). 2004. . registered attendees not included. Source: M.Costs for Promotion Vehicles  Trade Shows/Exhibits (lead generation for B to B sales) --Space rental average is $14. but can be as high as $42. Depends on quantity. drayage.

653 in bonus/commission). p.553 base salary plus $39. Source: “The 2005 Compensation Survey”. Sales & Marketing Management. .206 ($70. May 2005. Excludes healthcare & benefits costs. 25.Costs for Promotion Vehicles  Personal Selling --Average total compensation is $110. with Top Sales Executives earning $145.978.

com). --Hiring an outside firm much more costly and total cost.Costs for Promotion Vehicles  Web Site (awareness & lead generation) --Cost of Dreamweaver is $199 (Amazon. . add cost of web site developer’s time. plus monthly costs vary based on site’s complexity and functionality.

as well as on search and content sites (AOL. Earthlink & others). see Nielsen’s “Designing Web Ads Using ClickThrough Data”.Costs for Promotion Vehicles  Google AdWords --AdWords ads are displayed along with search results on Google. . --Cost per click pricing which you set (1 cent to $100 per click). Source: Google web site. --Click through rate not guaranteed (for an expert’s tips. 2006.

--Advertisers pay when users click on ads (CPC). . or when their ad is shown on your site (impressions). --It also allows web site publishers to provide Google search to their site users and earn money by displaying Google ads on the search results page. You earn a portion of the amount paid for either activity on your site. Source: Google web site. 2006.Costs for Promotion Vehicles  Google AdSense --AdSense is a quick way for website publishers to display relevant Google ads on their site’s content pages and earn money.

.What Is The “Marketing Mix”? Placement (Distribution):  For consumer products and B to B products. who then sells to consumer). Includes direct sales via the Internet. --Indirect (product sold by producer to intermediary. there are 2 possibilities: --Direct (product sold by producer to consumer).

Source: Contemporary Market Research.  Quota samples are selected so that demographic characteristics of interest are typically represented in the sample in the same proportions as they are in the population.What Type of Market Research Should I Conduct? Survey Research (quantitative):  Use a non probability quota sample (quicker and cheaper).  Refer to supplemental handout regarding market research. 1996. .. McDaniel & Gates. 3rd ed.

Source: Contemporary Market Research. 1996. . McDaniel & Gates.What Type of Market Research Should I Conduct? One-on-One Interviews (qualitative):  Allows for probing in specific areas due to 2-way communication.. 3rd ed.

 Buying process. what consumer/trade journals are read.What Type of Market Research Should I Conduct? Who To Target For Research:  Potential customers (target market)--consumers or businesses. internet sites visited.  Association memberships and trade show attendance.e. and decision makers. list serve affiliations). duration. including media consumption (i.  Potential channel members.  Potential buyers (often different than customers or “users”).  Feedback on 4 Ps. Information Needed:  Proof of viability of idea/market. .

Marketing 101 For Business Plans Questions? .